New York, NY, May 2--Business at the nation's manufacturers failed to pick up in April, with activity falling for the second consecutive month as the industry shifted focus from concern about the war to worries about a lingering weak economy, a private business group reported Thursday.
The Institute for Supply Management's manufacturing index fell to 45.4 last month, slipping from 46.2 in March. A reading below 50 means manufacturing activity is slowing; above 50 indicates the industry is more busy or growing.
Analysts had expected the slowdown in the manufacturing sector would continue, but they didn't think the index would fall below 50 by that much, forecasting a reading of 47 for April.
The ISM index was among a batch of reports out Thursday that gave a mixed reading on the nation's economic health and sent stocks lower.
The Labor Department said new claims for unemployment benefits fell last week by a seasonally adjusted 13,000 to 448,000. However, the total number of claims was still the second highest for the year.
Separately, the Commerce Department reported construction spending declined by 1% in March, the largest drop in seven months. Economists were predicting a small rise in overall construction spending.
``While the general economy is growing, it's growing slowly,'' said Dan Meckstroth, chief economist at Manufacturers Alliance, a business research group in Arlington, Va. ``We're not generating enough demand for the manufacturing economy. We're only generating growth in the service side, though not very rapidly.''
Economists and market watchers closely follow the ISM's index because it gives an early reading on the health of the manufacturing sector. The industry has weighed on the overall economy, which has been propped up by consumer spending.
Meckstroth said he expects the economy to pick up in the second half of the year. He noted key indicators are already pointing in that direction - energy prices are falling, the value of the dollar is declining and tax cuts are on the horizon.
``All we need is some kick, some type of stimulus to get the growth rate moving higher, now that a lot of the uncertainties, specifically the war, are gone,'' he said.
The ISM said new orders for manufactured goods were down again in April. Production, however, rose marginally, though it's still in contraction mode being below the key 50 mark.
Likewise, the level of manufacturing jobs remained under 50 in April for the 31st consecutive month, meaning no new jobs were created.
The good news is that manufacturing managers reported seeing a drop in prices they pay to do business, though overall, prices remain high.
The ISM index is based on a survey of managers who because they buy raw materials for their manufacturing companies have a good idea of how busy or slow the industry is in any given month. The ISM makes questionnaires available early in the month and the managers return them via fax, e-mail or regular mail. The ISM does not release the cutoff date for the survey, but requires a minimum 60% response rate to compile its index.
