Indexes Could Spur Bigger Rate Hike

The nation’s manufacturing sector registered further growth in April, though at a slightly slower pace than the month before, while the increase in prices for raw materials also moderated.

Yet the figures Monday from the National Association of Purchasing Management - along with a separate government report of a surprising rise in construction spending in March - paint a picture of such a strong economy that Federal Reserve policy-makers may feel compelled to raise interest rates more aggressively when they meet later this month, economists said.

Several analysts predicted that the Fed could boost short-term rates one-half percentage point at the meeting May 16. All five of the previous rate increases since last June have been a quarter-point. The rate increases have been aimed at reining in the economy and heading off a resurgence of inflation.

The purchasing managers’ group said its manufacturing index, based on a national survey of executives who buy raw materials for industries, registered 54.9 percent in April, weaker than the 55.8 percent reported for March and the lowest since a 54.4 percent reading last August. April’s number was below the 55.5 percent that Wall Street analysts had expected.

Still, any reading above 50 indicates growth, and the purchasing managers’ index has been above that level for 15 consecutive months.

The price index remained high at 76 percent in April but was down from the 79.8 percent spike the month before.