Data Show Recession In U.S. Manufacturing, Rise In Unemployment

ByBridgeNews Economic activity in manufacturing declined for the sixth straight month, showing that this sector of the economy has slipped into a recession, according to data released by the National Assn. for Purchasing Management (NAPM). The news came as U.S. government figures showed growth in personal income and consumer spending, but a sharp drop in spending on durable goods and a rise in unemployment. NAPM reports that its index of economic activity fell to 41.2 in January from 44.3 in December; economists had forecasted 44.0. The index remained well below 50, the border between economic expansion and contraction, for the sixth straight month. A recession is defined as economic contraction in two consecutive quarters, or six months. "We would say that by our standards, it would constitute a manufacturing recession," says Norbert Ore, chairman of the NAPM manufacturing survey. The January NAPM index was at the lowest level since March 1991, when the U.S. economy was experiencing its last recession. The sector has struggled in recent months with slowing demand, high interest rates, and soaring energy bills. Ore says, though, that technology has made the global economy more resilient than it was a decade ago, so it may be able to rebound faster than it did in the recession in the early 1990s. In another troubling sign for U.S. manufacturers, spending on durable goods dropped for the third consecutive month. Spending on goods such as autos, appliances, and furniture fell 1.9%, the biggest decline since May 1999. Some economists say the weak manufacturing data, coupled with layoffs and deteriorating consumer confidence, may encourage the Federal Reserve Bank to cut rates again before its next meeting on Mar. 20. On Jan. 31, the Fed cut short-term rates by one-half ofa percentage point to 5.50%, building on the surprise 50 basis-point cut it announced Jan. 3.