Originally created 06/02/01

Industry continues its slump



NEW YORK - Manufacturing activity skidded for a 10th straight month in May, offering a bleak snapshot of the nation's business climate, an industry report showed Friday.

The survey by the National Association of Purchasing Management indicated that manufacturing is still the weakest part of the economy and might hinder its recovery, analysts said.

"Manufacturing is in a full-blown, outright, unmitigated recession," said Mark Zandi, chief economist at Economy.com. "It's an open wound that hasn't been bandaged yet and threatens to infect the rest of the economic body."

The Tempe, Ariz.-based association said its purchasing index fell last month to 42.1 from 43.2 in April. An index above 50 signifies growth in manufacturing, while a figure below 50 shows contraction.

Analysts had been expecting a NAPM index of 43.5.

The NAPM report is closely watched because it is one of the first indications of how the manufacturing sector performed in May. The figures are based on a survey of purchasing executives who buy the raw materials for manufacturing at more than 350 industrial companies.

The report reflected purchasing managers' concerns about the economy, the impact of soaring energy prices and a lackluster quarter in the automobile sector, said Norbert J. Ore, who oversees the monthly report.

Despite the decline in production, employment and orders in the manufacturing industry, Mr. Ore said he was encouraged that the report showed a drop in prices and inventories.

"That bodes well for relief in our costs," he said. "Most manufacturers don't find themselves in a position where (they) can pass on the increases."

But the NAPM report provided "no evidence of recovery" because manufacturing slowed at a faster pace in May than in recent months, Mr. Ore said.

In a separate report, the Labor Department said Friday the nation's unemployment rate dipped modestly to 4.4 percent in May, the first improvement in eight months. The overall jobless rate reached 4.5 percent in April, the highest level in 2 1/2 years.

Manufacturing suffered heavy layoffs last month, losing an additional 124,000 jobs. Since July, manufacturers have fired 675,000 workers as they have struggled to cope with shrinking demand and a rising backlog of unsold goods.

Stocks were higher after the release of the reports. Of the 20 industries in the manufacturing sector, just three - food, industrial and commercial equipment and computers and wood and wood products - reported growth.