However, within the index there was a rise in new orders, (back to last Summer's levels), and a drop in inventories, (to the lowest level since 1991). Confidence in the US NAPM index has deteriorated recently because it has been sending more pessimistic signals about activity than official data.
The drop in inventories is consistent with the second estimate of US GDP growth in the final quarter of 1995, which showed a downward revision to growth from 0.9% to 0.5%, (at an annual rate). A more subdued picture of activity partly reflects a faster reduction of involuntary stock accumulation at the end of last year than was at first anticipated, providing a more optimistic backdrop to a rebound in activity in 1996.
Other US data released during the week provided evidence of this economic rebound. The index of leading indicators rose sharply in February, reflecting the surge in payrolls and hours worked reported at the beginning of last month. Consumer spending and personal income also grew vigorously, more than making up for January's declines.
Robust UK money supply growth has become an issue in recent months, because of its history as a leading indicator of inflation. Annual M0 growth declined from 6.0% to 5.4% last month but remained well above the 4% ceiling of its monitoring range. Within the total, notes and coins growth remained robust, supporting other evidence of a buoyant retail sector.