Rising Prices Add To Inflation Jitters

The manufacturing economy grew in February at a rate slightly higher than the previous month, an industry group said in a report that also saw rising prices of raw materials and increased borrowing costs.

While the manufacturing report added to inflation jitters, the National Association of Purchasing Management said its members were worried that competition would prevent them from passing along higher prices to consumers.

The index of the manufacturing economy rose to 56.9 percent in February from 56.3 percent in January, the association said. A reading above 50 percent indicates growth in the manufacturing economy, and February marked the 13th straight month of expansion.

Norbert J. Ore, head of the association's survey committee, said the index "continues to indicate most manufacturers are paying higher prices for their purchases." But he also said that among members of the group that buys supplies for industry, "the concern is that they will not be able to pass through the price increases."

Among the purchasing managers surveyed, 47 percent reported higher prices for raw materials, an increase from 42 percent in January.

Meanwhile, construction spending around the country shot up by 2.7 percent in January - the biggest increase in nearly two years.

The Commerce Department reported that construction spending surged to a seasonally adjusted annual rate of $751.8 billion, an all-time-high monthly level. The jump was led by substantial increases in spending on housing, commercial buildings and big government projects.

Construction performance in the first month of the year was much stronger than the slim 0.1 percent increase many analysts were projecting. Some analysts had even predicted a decline. The 2.7 percent advance marked the strongest pace since a 3.7 percent rise in June 1998.

In December, construction spending rose by 2.1 percent, slightly more than the government estimated one month ago.