Manufacturing slide confirms that US industry is in recession

Manufacturing activity in the United States fell last month to its lowest level in almost a decade, an industry survey showed yesterday. It confirmed that industry is already in recession and suggested that the rest of the economy may be contracting too.

Manufacturing activity in the United States fell last month to its lowest level in almost a decade, an industry survey showed yesterday. It confirmed that industry is already in recession and suggested that the rest of the economy may be contracting too.

With activity in manufacturing declining for the sixth successive month, the figures from the National Association of Purchasing Managers vindicated Wednesday's Federal Reserve announcement of a second half percentage-point cut in interest rates to 5.5 per cent.

However, the European Central Bank left interest rates in the eurozone unchanged at 4.75 per cent yesterday. Wim Duisenberg, the ECB president, said the US slowdown might spill over, but he said the euro area economy depended mainly on domestic factors. "Growth is very likely to continue at a reasonably robust pace," he said. But he hinted the ECB had become less concerned about inflation and more aware of risks to growth arising from the US slowdown.

The NAPM said its index of activity in US manufacturing fell to 41.2 in January from 44.3 in December. The output component dived to its weakest since May 1982. The scale of the downturn in manufacturing - about one-fifth of the US economy - indicates the economy as a whole is in outright recession, said Norbert Ore, a NAPM spokesman. However, he added: "This technology-driven, global economy is more resilient and should be able to rebound more quickly than it did in 1991."

The survey, published a day before official US data on jobs, unemployment and earnings, showed a sharp fall in employment in industry in January.

The US rate cut helped the euro to one-week highs against the dollar yesterday. It touched $0.9425 before easing.

The purchasing managers' survey for Europe showed a decline in the rate of growth in manufacturing, the index falling to 52.9 from 53.4 in December and a peak of 60.2 in April 2000. But a level above 50 confirms that European industry is still growing at a respectable pace.