THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Thursday, May 2, 1996 TAG: 9605020396
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY FARRELL KRAMER, THE ASSOCIATED PRESS
LENGTH: Medium: 61 lines
New signs of strength in manufacturing, construction and the overall economy suggest that growth is steady and that concerns about recession that caused much hand-wringing are no longer much of a threat.
The major economic reports released Wednesday indicate that the economy is sticking to the course of moderate growth and low inflation charted by Federal Reserve Chairman Alan Greenspan, a course that has thrilled Wall Street and driven stock prices to dizzying heights.
A monthly survey of purchasing executives showed that manufacturing activity improved in April for the first time since last summer. The government reported that construction spending shot up in March.
An index designed to forecast economic activity six to nine months in advance also showed a March rise, its second in a row.
``This is what the doctor ordered, Dr. Greenspan,'' said Sung Won Sohn, chief economist at Norwest Corp., a banking company.
Greenspan's prescription for the economy has brought the results he was seeking. By raising, then lowering, short-term interest rates, the Fed chairman appears to have guided the economy to a ``soft landing,'' where economic growth is sustained.
A number of economists had been predicting an imminent recession earlier this year, right up until early March when the government reported that more than half a million jobs were created in February.
Strong employment numbers the next month validated that belief, along with various other data like Wednesday's figures.
The number that had the biggest impact, at least on Wall Street, was the National Association of Purchasing Management's manufacturing index. It improved to 50.1 percent in April from 46.9 percent in March, the first time since July 1995 it has risen above 50 percent.
The result was seen as encouraging, but not stellar. Readings above 50 percent represent expansion inmanufacturing.
``What the data did indicate was continued slow growth in the manufacturing sector, some pickup, but not the pickup that had been feared,'' said Marilyn Schaja, money market economist at Donaldson, Lufkin & Jenrette Securities Corp.
At the same time the manufacturing index was released, the Commerce Department reported construction spending rose 3.1 percent in March, the biggest gain in four years.
Prospective homeowners had some good news, too, with the National Association of Realtors reporting its Housing Affordability Index improved for the first three months of the year.
Completing the Wednesday picture, the Conference Board reported that its Index of Leading Economic Indicators rose 0.2 percent in March, marking its first consecutive monthly gains in 1 1/2 years and its highest level in a year.
The private research group said the improvement followed an increase of 1.3 percent in February and a revised drop of 0.6 percent in January. by CNB