- The Washington Times - Friday, February 28, 2003

CHICAGO, Feb. 28 (UPI) — The National Association of Purchasing Management-Chicago said Friday business activity in the nation's Midwest expanded in February for a fourth consecutive month but at a slower pace than in January.

The NAPM-Chicago said its business barometer fell to 54.9 from 56.0 in January.

Most economists on Wall Street had expected the index to decline to 53. A reading below 50 indicates a contracting regional manufacturing sector, while a reading above 50 signals expansion.

The index dropped below 50 in September and October, showing contraction for the first time in eight months.

The National Association of Purchasing Management — Chicago compiles a survey and a composite diffusion index of manufacturing conditions in the Chicago area whose distribution of manufacturing firms mirrors the national distribution.

The NAPM — Chicago is considered a leading indicator of the ISM manufacturing index.

Investors watch the report to track economic data like the NAPM — Chicago to understand the economic backdrop for the various markets.

The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers a moderate growth environment that won't generate inflationary pressures.

The NAPM — Chicago gives a detailed look at the Chicago region's manufacturing sector, how busy it is and where things are headed. Since manufacturing is a major sector of the economy, this report has a big influence on the markets. Some of the NAPM — Chicago's sub-indexes also provide insight on commodity prices and other clues on inflation.

The U.S. Federal Reserve Bank closely watches this report because when inflation signals are flashing, policymakers can reset the direction of interest rates. As a consequence, the bond market can be highly sensitive to this report.

The latest report showed the employment component of the index rose to 46.6 from 45.6 in January, the prices paid rose to 54.9 from 54.2 last month and the supplier deliveries declined to 51.7 from 52.2 a month ago.

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