Rising prices worry manufacturers

greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Fair use for educational/research purposes only!

Rising prices worry manufacturers Interest rate increase likely from Fed meeting BY EILEEN ALT POWELL Associated Press

NEW YORK: A manufacturing group warned yesterday that ``prices are rising to levels of concern'' as the nation's industrial economy grew in January for a 12th straight month.

The inflation warning came as Federal Reserve policy-makers began a two-day meeting in Washington that is expected to result in the fourth increase in interest rates since June.

Yesterday's figures from the National Association of Purchasing Management confirmed that the current economic expansion -- already the longest in American history -- is continuing.

But a worrisome jump in the prices of raw materials -- to the highest reading in nearly five years -- gives the Fed even more cause to raise interest rates to cool the economy and hold inflation in check.

``The manufacturing sector appears to have momentum, but prices are rising to levels of concern, particularly with a new round of petroleum price increases,'' said Norbert J. Ore, head of the group's business survey committee.

Markets were uneasy as traders waited for the Fed's decision, but bargain-hunting once again drove stocks broadly higher. The Dow Jones industrial average, up 201 points Monday, gained an additional 100.52 to close yesterday at 11,041.05.

The Nasdaq composite index rose 111.63 to 4,051.98, its sharpest point gain since Jan. 7.

The Standard & Poor's 500 rose 14.82 to 1,409.28.

The purchasing executives' group said that its manufacturing index, based on a national survey of executives who buy raw materials and other supplies for industry, registered 56.3 percent in January, down slightly from a revised 56.8 percent in December but still stronger than expected. A reading above 50 percent indicates growth.

The index is watched closely because it is the first national reading for January on U.S. industrial performance, a key sector of the economy.

The index component measuring prices factories pay for raw materials surged in January to 72.6 percent from a revised 68.3 percent the month before.

David Orr, chief economist at First Union Corp. in Charlotte, N.C., characterized the high price index reading as ``the danger zone,'' noting: ``The last two times it was above 70 percent -- in 1994-95 and 1987-88 -- correlated with aggressive Fed tightening'' of credit.

mahershalalhasshbaz@mail.com), February 02, 2000

Answers

Rising prices worry manufacturers!

-- Maher Shalalhashbaz (mahershalalhasshbaz@mail.com), February 02, 2000.

Good post! Thank you.

-- Dee (T1Colt556@aol.com), February 02, 2000.

Cool name, Maher. Been reading Isaiah, I see.

-- DB (tomG@h.com), February 02, 2000.

Most Humble Thanks - DB

-- Maher Shalalhashbaz (mahershalalhasshbaz@mail.com), February 02, 2000.

Moderation questions? read the FAQ