Friday September 1 6:10 p.m. EDT

Purchasing Managers Index Dips

NEW YORK (Reuter) - Purchasing managers, who have their fingers on the pulse of the nation's manufacturing sector, said Friday their index fell unexpectedly last month, which may prompt the Federal Reserve to ease interest rates.

The National Association of Purchasing Management said its index dropped to a lower-than-expected 46.9 percent in August, calling into question a rebound in manufacturing.

Economists said the figure would give the Fed room to lower interest rates in the near future. In July, the central bank cut interest rates for the first time in nearly three years.

``The NAPM report suggests that the overall trend in manufacturing activity continues to be weak,'' said Carol Stone, senior economist at Nomura Securities International Inc.

``It can certainly play into the overall scenario of a Fed easing,'' Stone added.

The Purchasing Managers' Index slid to 46.9 percent in August from 50.5 percent in July but remained above its May and June readings. This is the third time in four months that the index has indicated a decline in the manufacturing economy.

A reading below 50 percent indicates that the manufacturing economy is generally declining; above 50 percent means that it is generally expanding.

U.S. economists in a Reuter poll had predicted, on average, a figure of 51.5 for August. The weaker overall number, as well as lower component figures, took economists by surprise.

Analysts said the numbers indicated the manufacturing sector, rather than rebounding, is closer to where it was in May and June, when the overall index posted levels of 46.1 and 45.7, repectively.

The association's production and new orders indexes also moved below 50 percent, indicating reductions, with the orders index dropping to 46 percent from 53.3 percent in July.