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Friday, June 5, 2020  Spokane, Washington  Est. May 19, 1883
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News >  Nation/World

Wall Street Applauds Slower Growth

By Associated Press

Figures released Tuesday showed the economy’s growth slowing, leaving little doubt on Wall Street that Federal Reserve policy-makers will skip a chance to raise interest rates this week.

Stock and bond prices rallied on news that the manufacturing economy’s growth slowed more than expected in June. The numbers from the National Association of Purchasing Management showed a cooling economy with falling raw materials prices, but strong employment.

The numbers were seen as a sign that inflation is under control and that the Fed need not push interest rates higher to stem rising prices and slow the economy’s growth.

Also Tuesday morning, the Conference Board reported its leading economic indicators rose slightly in May. But the numbers were overshadowed by the purchasing managers’ report and the worst fall in more than three years in construction spending.

Economists said the reports, issued on the first day of the third quarter, suggest a return to tamer growth after a brisk six months.

“It appears to be the best for Main Street and Wall Street with low interest rates and moderate economic growth,” said Alan Ackerman, senior vice president at Fahnestock & Co. in New York.

The National Association of Purchasing Management’s index of business activity fell to 55.7 percent in June from 57.1 percent in May. Economists expected a reading of 57 percent.

News of the slackening economy comes as markets await the results of the interest-rate policy meeting by the Fed, which began a two-day session on Tuesday.

Analysts said an interest rate hike now would shock Wall Street.

“The street is prepared for no move. If they did move, coming out of left field completely, it would devastate the market,” said Larry Wachtel, market analyst at Prudential Securities in New York.

NAPM’s prices-paid index fell, while its measure of manufacturing employment rose for the fourth month. Order backlogs increased and supplier deliveries fell.

The monthly report, which is based on a survey of purchasing managers, provides current, anecdotal evidence of the economy’s direction. A reading above 50 percent suggests an expanding manufacturing economy, while a reading below 50 percent suggests it is shrinking.

The Conference Board said the index of leading economic indicators rose 0.3 percent in May. The rise to 103.8 slightly exceeded expectations for a 0.2 percent gain, but failed to alarm Wall Street when taken with the other reports.

The May rise in the index followed a drop in April of 0.1 percent. The March index was up 0.3 percent.

The Commerce Department said construction spending dropped 1.8 percent in May, reflecting widespread weakness in commercial, residential and public construction.

Construction activity totaled a seasonally adjusted annual rate of $585 billion, compared with $595.7 billion in April. Economists were looking for a May gain of about a 0.5 percent.

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