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US economy: higher prices worry industry, economy continues to grow |
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April 5, 2000
NEW YORK, APR 4 (AP) - With prices for energy and industrial raw materials rising at their fastest rate in five years, manufacturing executives are worried that the added expenses may hurt business, according to a private report.
Despite the higher prices, the industrial economy continued to grow in March, at a slightly lower rate than in February, according to the widely watched report by National Association of Purchasing Management released Monday.
Norbert J. Ore, head of the association's survey committee, said prices were increasing "at an alarming rate," with 17 of 20 industries reporting higher costs for supplies, especially for fuel and transportation.
"A number of respondents expressed concern that escalating energy-related costs may slow the economy," the report said.
The report, which surveyed the purchasing executives at more than 350 industrial companies, stoked expectations that the Federal Reserve will raise interest rates for a sixth time since June to cool off the economy.
But the news, including a government report of a sharp rise in construction spending in February, had little impact on the stock market, which was mixed in a turbulent session.
The Nasdaq composite plummeted 349.15, or by 7.6 percent, to 4,223.68. It was the biggest one-day point drop and the fifth-biggest daily percentage decline ever. Technology shares continued a steep sell off, with Microsoft shares plunging on the collapse of negotiations to settle an antitrust case with the government. Microsoft stock lost about dlrs 80 billion of its market value. But the Dow industrials shot up 300.01, or 2.7 percent, to 11,221.93.
In another sign that the five past Fed rate increases have yet to rein in the galloping economy, construction spending rose 1.5 percent in February, the Commerce Department said Monday.
Led by a big jump in commercial construction, spending reached a seasonally adjusted all-time high monthly level, at an annual rate of dlrs 758.7 billion.
The purchasing managers' index of the manufacturing economy was at 55.8 percent in March, down from 56.9 in February, but well above the reading of 50 percent that indicates growth. The index, which measures prices paid for raw materials, was at its highest level since February 1995.
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