Manufacturing Index Keeps on Rolling

NEW YORK — A new report Wednesday showed manufacturing activity picked up its pace in February, registering its 13th straight month of growth.

The National Assn. of Purchasing Management said its index, which is a key gauge of strength in the U.S. manufacturing sector, rose to 56.9 in February, up from 56.3 in January and ahead of the 56.8 reading in December.

But an NAPM gauge showing prices manufacturers paid for their goods--closely watched by markets as a measure of potential inflationary pressures--increased for the third month running to reach its highest level since April 1995.

The NAPM price index grew to 74.1 in February from 72.6 in January.

That is due in part to rising oil prices, which have helped boost prices overall for U.S. manufacturers. On Wednesday, U.S. oil prices skyrocketed to a fresh nine-year high.

The NAPM report is the first national economic report for February and analysts said it shows no letup in the high-powered U.S. economy.

Separately, the government reported that spending on new construction projects rose to a record level in January, led by a surge in new housing and public construction projects.

The Commerce Department said construction spending rose 2.7% to $751.8 billion in January, the biggest gain since a 3.75% increase registered in June 1998.

At NAPM, Norbert Ore, chairman of the organization’s business survey committee, said U.S. manufacturers were feeling the effects of rising oil prices. “Our panel reports fairly intense pressure across the board on prices,” Ore said.

He said any relief in oil prices would help ease the pressure but would not eliminate it completely.

Yet so far, Ore said, there are only some anecdotal reports that higher input costs are being passed on to customers.

Oil prices have been rising steadily for some months and averaged about $29 a barrel last month, almost triple year-ago prices.

On Wednesday, gasoline rose almost 6%, pulling crude oil above $31 a barrel for the first time in nine years, on expectations that motor fuel will be in short supply when demand picks up during the warm-weather months. April crude oil futures soared $1.34, or 4.4%, to $31.77 a barrel in New York.

Analysts said the NAPM report, particularly its “prices paid” component, would give Federal Reserve Chairman Alan Greenspan more reason to push short-term interest rates higher to cool the economy. The Fed’s rate-setting committee next meets March 21 and is widely expected to raise its key rate by a quarter percentage point to 6%.