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Monday, 2 April, 2001, 16:23 GMT 17:23 UK
US manufacturing shows strength
Factory
One in five employees in the US work in factories
A closely watched index of US manufacturing activity showed signs of improvement in March for the second month in a row.

The news is a further hint that the Federal Reserve's policy of interest rate cuts seems to be working in helping to lift the US economy out of the doldrums.


The overall picture is one of continued decline in manufacturing activity

Norbert Ore
chairman NAPM
The National Association of Purchasing Management (NAPM) reported that its manufacturing index rose to 43.1 from 41.9 points in February, surprising financial markets which had been expecting a weak 41.4 reading.

But although the index revealed some signs of improvement in the US economy, any figure below 50 still indicates a contraction.

"The overall picture is one of continued decline in manufacturing activity during the month of March," said Norbert Ore, chairman of the NAPM survey.

Interest-rates on hold

The news may make the Federal Reserve less likely to continue its aggressive policy of frequent interest rate cuts in order to prop up the economy.

"Lately there have been some rumours of an inter-meeting cut and a slightly higher NAPM reading dims those chances," said Don Kowalchik, bank strategist at A.G. Edwards & Sons.

The news had little effect on the stock markets with the Nasdaq and Dow Jones Industrial average moving less than 1% in the three hours of trade.

"The fact that it was two months in a row of improvements could give some traders pause as to how much slowing the economy has to go," said Paul Christopher, an economist at A.G Edwards & Sons.

Rising exports

The NAPM survey also showed that US manufactured goods grew for the first time since September 2000, despite the strength of the dollar.

Parallel UK figures also issued today, revealed that UK exports were beginning to suffer as a result of the knock-on effect of the US slowdown.

Manufacturing accounts for about a fifth of US economic activity and jobs.

At 1250 New York Time (1750 GMT) the Dow Jones Industrial Average was 91.18 points higher at 9969.96 points.

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See also:

29 Dec 00 | Business
US slowdown to affect UK economy
30 Mar 01 | Business
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US economy: Sluggish growth
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