- The Washington Times - Wednesday, July 2, 2008

NEW YORK | The Institute for Supply Management said Tuesday that its index of prices that manufacturers pay for raw materials hit 91.5 in June, up from 87 in May and the highest reading since 1979.

Its overall index of manufacturing activity was 50.2, barely breaking a four-month contraction streak. Any reading above 50 signals growth.

Manufacturers are “experiencing higher prices for their inputs while demand for their products is slowing,” Norbert J. Ore, chairman of ISM’s manufacturing-business survey committee, said in a statement accompanying the report.

Some of the price increases are a game of catch-up.

Manufacturers say they honored the six-month price guarantees they gave customers before oil prices spiked 50 percent higher, hitting an intraday record of $143.67 a barrel earlier this week. When those price guarantees expired, manufacturers raced to recoup their increased costs.

Some manufacturers are struggling to keep pace. Myers Container, a Portland, Ore., manufacturer of steel drums, increased prices by almost 20 percent in March, did the same in May and announced a third increase at the end of that month.

Other manufacturers say they’re unable to pass along all their higher costs, so they’re trying to save money wherever they can.

FFC Paladin Light Construction Group, which makes plows, pallet forks and bale movers in Lee, Ill., is planning a lighting study to trim its electricity use, said Bob Steder, operations manager.

Similar inflation worries are playing out everywhere from convenience stores to the Federal Reserve.

Last week, the Fed talked about increased risk of inflation as it ended one of its most aggressive rate-cutting campaigns, leaving its key rate unchanged at 2 percent as fears about inflation have mounted. The Fed is caught between two risky crosscurrents: plodding economic growth on the one hand and galloping energy and food prices that threaten to spread inflation on the other.

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