The flat reading in the National Association of Purchasing Management's index for January reveals a manufacturing sector unable to rise from the depths of a stubborn U.S. recession, economists said.
The purchasing index was reported at 47.4 percent, unchanged from
December but still below 50.0 percent - the level said to represent growth in manufacturing rather than contraction.Dan Seto, an economist for Nikko Securities Co., said the index's stability reflects "an increase in inventories because most other categories declined." Mr. Seto suspected that the leap in inventories to 43.3 percent
from 38.6 percent in December revealed a slowdown in sales rather than optimism among manufacturers that an economic rebound is in store.
Victor Zarnowitz, an economist with the University of Chicago, agreed that the increase in inventories was involuntary, noting that if the manufacturing sector deteriorates further, the Federal Reserve will have to lower interest rates again.
The only other category to gain was employment, climbing a meager 0.2 percentage point to 40.5 percent, which Mr. Seto said suggested more contraction in labor and possible weakness in U.S. January employment data, scheduled for release Friday.
Of the report's other closely watched categories, production was unchanged at 50.6 percent, new orders fell to 50.3 percent from 51.3 percent, supplier deliveries slipped to 48.0 percent from 49.5 percent, and prices fell to 43.4 percent from 47.9 percent.