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Manufacturing Sector Halts Decline February Numbers Accompany Rise In Salaries, Spending

By John M. Berry
THE WASHINGTON POST -- WASHINGTON

The manufacturing sector of the economy remained weak last month, but the worst of its decline may be over, according to the monthly survey of the National Association of Purchasing Management released Thursday.

The NAPM’s index that tracks conditions at manufacturing firms rose slightly to 41.9 last month from 41.2 in January, breaking a string of 11 consecutive monthly declines. But the reading remained well below 50, indicating that the sector is continuing to contract. Still, some analysts said, the break in the index’s downward momentum could be a signal that the worst is over for manufacturing, the portion of the economy that has been hardest hit by the slowing of growth in recent months.

Meanwhile, other reports released Thursday showed increases in personal income, spending and construction in January, causing some analysts to suggest the U.S. economy will continue to grow in the first three months of the year. Growth in the fourth quarter of last year was only 1.1 percent, and some forecasters have predicted the economy will start shrinking and perhaps slide into a recession in the first half of this year.

Personal income rose a strong 0.6 percent in January, with the key wages and salaries portion up even more, 0.7 percent, the Commerce Department reported. The big increase in pay was the result of both a solid increase in the number of workers on payrolls and the number of hours worked. Both those factors were influenced to some extent by a swing from unusually bitter winter weather in December to more normal weather in January.

Personal consumption expenditures, which include spending for goods and services of all types, also increased 0.7 percent, Commerce said. However, after adjustment for inflation, particularly for energy services such as natural gas, the real increase was just 0.2 percent. That real gain matched that of December and was above the 0.1 percent increases in both October and November.

In the other report, Commerce said construction spending rose 1.5 percent in January after increasing 1 percent in December. Both private and public spending rose, with residential construction up 1.7 percent and nonresidential construction up a very large 5.8 percent, primarily because of increasing work on new industrial and commercial buildings.

The strength in housing and other construction should help the economy stay out of recession, analysts said.

“However, consumer spending should carry substantially more momentum into the second quarter” than it had when it entered the first quarter, said economist Joe Liro of Stone & McCarthy. “If the first quarter marks the bottom of the consumer retrenchment, then the economy will avoid a shallow recession.”