Manufacturing index, prices rose in December
WASHINGTON -- Manufacturing bounced back in December while prices in that sector rose to the highest levels in a year and a half, rekindling fears of inflation.</br></br>A closely watched index of manufacturing strength, compiled monthly by the National Association of Purchasing Management, rose to 54.0 last month from 52.7 in November -- the best performance since June. A reading of more than 50 generally signals that manufacturing is expanding. A figure below 50 indicates manufacturing contraction.</br></br>As part of its survey of purchasing managers, the association also asks about prices, and this index surged to 51.5 in December from 45.9 in November, reversing two consecutive monthly decreases.</br></br>The stock and bond markets, which have been nervously scrutinizing economic data lately for any signs of inflation, tumbled on the news. The Dow Jones Industrial Average fell nearly 100 points in early trading before recovering to end the day at 6442.49, down 5.78. The 30-year Treasury bond finished 1 6/32 lower, a loss of $11.875 for a bond with a $1,000 face value; the bond's yield -- which moves in the opposite direction of price -- rose to 6.73% from 6.64%.</br></br>Norbert Ore, who directed the survey, dismissed the inflation fears as exaggerated, saying the report "indicates more of a firming of prices" than an escalation. "This is only the third month in 1996 that we had higher prices reported," he added. "I don't think at this point you can establish a trend."