- The Washington Times - Monday, May 2, 2005

ASSOCIATED PRESS

Growth at the nation’s manufacturers slowed in April for the fifth consecutive month, reflecting a cooling economy that may be easing inflation worries.

The Institute for Supply Management (ISM) said yesterday that its index measuring manufacturing activity registered 53.3 in April, down from a 55.2 reading in March.

The manufacturing sector’s performance was weaker than the 55 analysts had expected, and it left the index at its lowest level since July 2003, but it means the sector expanded for the 23rd consecutive month.

A reading of 50 or above in the index means the manufacturing sector is expanding, while a figure below 50 represents a contraction.

“The report is consistent with some moderation in the economy,” said Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, N.C. He believes the Federal Reserve nevertheless needs to continue raising short-term interest rates to ensure inflation does not become a problem.The Federal Reserve meets today and is expected to raise the federal funds rate by one-quarter of one percentage point, to 3 percent.

Norbert J. Ore, head of the ISM’s survey committee, framed the slowdown in the manufacturing sector’s growth as a good thing, saying it “should relieve some of the pricing pressure that the sector has experienced during 2004 and year to date in 2005.”

Manufacturers’ costs have risen with higher prices for oil and other commodities, though many companies have been able to pass along those higher expenses to consumers.

Douglas Porter, deputy chief economist at BMO Nesbitt Burns, said “you could make the case that manufacturing activity had been running too hot for comfort for the past year or so.”

“We would have had serious inflationary pressure had the manufacturing sector kept growing at that pace,” he added.

Now, he said, the U.S. economy appears to be on track to expand at a sustainable rate.

Also yesterday, the Commerce Department said construction spending rose 0.5 percent to a record level in March, as strong building activity at offices and shopping malls helped offset a slowdown in housing construction.

The increase pushed total construction activity to a seasonally adjusted annual rate of $1.05 trillion, an all-time high, the agency said.

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