Non-Factory Index May Signal Rebound

A measure of U.S. non-manufacturing business rose in February for the first time in three months, a sign the economy may be starting to rebound after stalling at the beginning of the year.

The National Assn. of Purchasing Management said Monday that its non-manufacturing business index rose to 51.7 from January’s 50.1, which was the lowest since the report’s inception in July 1997. A reading above 50 means activity is expanding, while below 50 indicates contraction.

The increase, together with the first rise in a year for NAPM’s factory index, reported Thursday, “reinforces the notion that January was a low” for growth, Steven Wieting, an economist at Salomon Smith Barney in New York, told Bloomberg News. Still, “the idea of a recovery is very tentative at this point.”

Even with the February increase, the overall non-factory index is below its six-month average of 57.2.

NAPM’s index of prices paid by non-manufacturing companies, a measure of costs for purchased materials and services, fell to 60.5 in February from 62 in January.

The index of new orders rose to 51.3 in February, from 49.9 in January, helped by an increase in business at real estate companies.

The index measuring backlogs of orders rose to 45.5 in February from 42.5 in January. It was 52 in February last year. The index of inventory change rose to 47 from a January reading of 45.5. It was 49.5 a year earlier.

The employment index fell to 50.3 from 52.3 the previous month, while the index of imports fell to 46.8 from 50 in January.

Separately, a survey of manufacturers showed that four out of five expect flat or negative economic growth through the second quarter, with weak capital investment and earnings for 2001.

“In light of their weak economic position, it’s no surprise that the majority of manufacturers expect gross domestic product growth of 2% or less in 2001,” said Jerry Jasinowski, president of the National Assn. of Manufacturers.