2 Economic Measures Show Improvement : Economy: Corporate purchasing managers’ orders were up in May. Spending on construction rose in April.

Two economic reports provided fresh evidence Monday that the worst of the recession is over.

The nation’s purchasing managers reported that business activity improved in May, and the Commerce Department reported that spending on construction grew 0.8% in April.

Providing the first glimpse of economic activity in May, the National Assn. of Purchasing Management said its monthly index jumped to 45.4% from 42.1% in April.

Economists said the private group’s report, like other recent data, suggests that the economy has stopped shrinking. But it remains far from clear that growth has resumed, it said.

In general, a reading below 44% shows that the economy is in recession, the group said. The index was below that level for seven months.

In a separate report, the government said spending on construction rose more sharply in April than in 14 months, a sign that parts of the building industry may be recovering.

The purchasing managers’ index measures the activity of corporate purchasers--who buy everything from plastics to packing boxes to computer chips--at more than 300 companies. It is recognized as a reliable signal of economic activity, particularly in the manufacturing sector.

Despite the improvement, the report indicates that manufacturers are not out of the woods.

That is because a reading below 50% in the index suggests that the manufacturing sector is shrinking. Manufacturing accounts for 20% of total economic activity.

Although the index remained below 50%, it rose for the fourth straight month, signaling that the decline in manufacturing is slowing. It peaked above 44% for the first time since last September.

Robert Bretz, chairman of the group’s Business Survey Committee, said the data pointed to a rebound in the economy.

“Now that the overall economy has begun to expand again, the next milestone for improvement is the end of the decline in the manufacturing sector,” Bretz said.

The Economy:

Purchasing Managers’ Index Advances

Indicator: A monthly index of business activity compiled by the National Assn. of Purchasing Management, which surveys purchasing managers at more than 300 industrial companies.

What it did: The May index rose to 45.4% from 42.1% in April. The upward spurt carried the index past 44%, the point at which the association says the overall economy generally begins to expand. The May showing, the best since a 47.45% reading last August, marked the fourth consecutive gain for the purchasing managers’ index. In January, it reached a bottom of 37.7%, and had not exceeded 44% since a 44.9% showing in September.

What it means: Analysts say the survey provided more evidence suggesting that the recession is about over and the economy is probably in the early stages of recovery.

Highlights: The purchasing managers said new orders for their firms’ products rose sharply in May, their best performance since June, 1990. Inventories continued to decline in May, which could boost new orders and production.

Construction Spending Up Indicator: The April construction spending report from the Commerce Department, which tracks residential, non-residential and government construction spending.

What it did: Construction spending grew 0.8% to a seasonally adjusted annual rate of $392.6 billion, up from $389.3 billion in March. It was just the second advance in a year. The report also said March outlays, estimated to have slumped 1.5%, fell 2.1%. And although the April increase was the largest since a 2.2% gain in February, 1990, spending in April was down 11.7% from the same month in 1990.

What it means: Analysts say the figures are new evidence the housing industry has seen the worst of its hard times. Both new-home sales and housing starts have risen for three straight months, signaling continued advances in this sector. But spending on large apartment projects is likely to remain weak because of high vacancy rates in many areas of the country and a lack of financing.

Highlights: Spending on non-residential buildings picked up 4.4%, to $95.7 billion, nearly offsetting a 4.8% loss a month earlier. It was the largest gain in this sector since a 5.1% jump in December, 1988, and was paced by a 5.4% gain in spending on industrial projects such as warehouses and plants.

AP/Los Angeles Times

Purchasing Manager’s Index The purchasing manager’s index tracks overall business activity at 300 industrial companies. May, 1990: 50.1% May, 1991: 45.4% Source: National Assn. of Purchasing Management

Construction Spending Billions of dollars, seasonally adjusted April, ‘91: 392.6 March, ‘91: 389.3 April, ‘90: 444.7 Source: Commerce Department