Key Economic Index Points to Solid Growth

Manufacturing slowed slightly in August, though activity remained at solid levels as prices edged higher, the nation’s purchasing managers said Tuesday.

The National Assn. of Purchasing Management said its widely watched index of manufacturing activity fell to 56.8 in August from 58.6 in July. A reading above 50 indicates growth in manufacturing, whereas one below that points to contraction.

“The overall picture in August . . . is one of continued growth in manufacturing activity,” said Norbert Ore, chairman of the group’s business survey committee. “The rate of growth of new orders and production is strong, while prices were up for a number of commodities.”

The August report--the first broad reading of the economy’s performance for the month--suggests that growth overall may be accelerating from already strong levels, Ore said.

The report appeared to spur investor activity Tuesday as the Dow Jones industrial average rose a record 257 points to close at 7,879.78. “The industrial sector remains healthy but free of excess,” said Bruce Steinberg, chief economist at Merrill Lynch & Co. in New York.

The purchasing manager group’s average reading of 55.3 from January through August equates to 4% growth in gross domestic product, the broadest measure of the nation’s economy, while the 56.8 reading for August alone corresponds to a 4.5% growth rate, the association said.

The Commerce Department said last week that the economy grew at a 3.6% rate in the second quarter, up from its initial estimate of 2.2% for the April-June period.

“The numbers indicate that the economy has had excellent growth and should be able to continue to grow,” Ore said.

The group said prices rose last month, as its prices-paid index edged up to 53.8 from 53.6 in July.

But the higher prices, which sparked inflation worries among some purchasing executives, may have been temporary due to shipping problems related to the 15-day Teamsters strike against United Parcel Service of America in August, the group said.

“Members . . . expressed concerns about greater upward pricing pressures,” Ore said. The UPS strike caused delays and higher prices for most members of the association.

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Purchasing Managers Index

The index tracks overall business activity at more than 300 industrial companies. A reading over 50% indicates that the manufacturing economy is growing.

1997: 56.8%

Source: National Assn. of Purchasing Management