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Tuesday, 4 September, 2001, 22:34 GMT 23:34 UK
US manufacturing hints at recovery
US factory
The latest figures have raised hopes of a recovery in US manufacturing
The first sign that the slump in US manufacturing could be easing came on Tuesday with the release of the latest sector survey.

The National Association of Purchasing Management (NAPM) said its monthly manufacturing index rose to 47.9 in August from 43.6 the previous month - well ahead of forecasts.

The Dow Jones industrial average initially jumped over 2% on the news, but slipped back in late trade eventually ending less than half a percentage point higher.

On the currency markets the news helped the dollar rise to a three week high against the euro.

Worst is over?

The latest NAPM figures showed that US manufacturing is still declining, but less sharply than before.

I would consider this cause for optimism that the manufacturing sector has seen its worst

Norbert Ore, NAPM
An index above 50 shows growth in manufacturing, while a figure below 50 implies a contraction.

But the jump in the index figure - to 47.9 from 43.6 - was much higher than had been expected, and suggests the rate of contraction is slowing.

The number was also far better than forecasts from analysts, who were expecting a figure nearer the 44 level.

The index for new orders rose to 53.1 from 46.3, showing that orders actually grew in August for the first time in over a year.

Another positive sign it that manufacturers are continuing to clear the backlog of stock which built up as the slowdown hit, clearing the way for new production.

The chairman of the NAPM's business survey committee Norbert Ore was upbeat about the survey's findings.

"I would consider this cause for optimism that the manufacturing sector has seen its worst" he said.

Some analysts were even more optimistic.

"The recovery starts right here, further Fed easing is unnecessary" said Ian Shepherdson, chief US economist at High Frequency Economics.

Car sales fall

But it was not all good news for the US economy on Tuesday.

The carmakers Ford, General Motors and DaimlerChrysler all reported a drop in sales during August, suggesting the US slowdown may finally be spreading to consumer spending.

DaimlerChrysler's US sales fell 24% during the month - which was worse than expected.

Ford's sales - excluding its Jaguar, Volvo and Land Rover models - fell 8.4%, and General Motors recorded a 7% drop.

Market reaction

The NAPM figures gave a welcome boost to shares on Wall Street, but the gains didn't last.

The Dow Jones industrial average initially jumped over a 200 points on the news, breaking back through the 10,000 level.

But a sell-off during the last hour of trade saw the Dow slip back to end up only 47.74 points at 9997.49.

The tech-heavy Nasdaq index fell 34.65 points to 1,770.78, while the broader Standard & Poor's 500 Index ended barely moved at 1132.94.

On the currency markets the dollar rose sharply against the euro and at one point was trading at 88.58 cents to the euro.

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See also:

31 Aug 01 | Business
Greenspan: Consumers driving economy
29 Aug 01 | Business
IMF to cut global forecasts
28 Aug 01 | Americas
Bush budget in trouble
27 Aug 01 | Business
Fresh signs of US slowdown
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