But December's increase was much smaller than the 0.8 percent gain posted in September. In another report, the National Association of Purchasing Management said that its index of manufacturing activity fell to 41.2 in January. The last time manufacturing posted a reading that low was in March 1991. On Wall Street, the Dow Jones industrial average gained 43 points by midday and the Nasdaq index, reversing Wednesday's slide, picked up 22 points. Seeking to prevent the faltering economy from slipping into a recession, the Federal Reserve on Wednesday cut interest rates by another half percentage point, following up on its first cut on Jan. 3.
Economists predict more rate reductions in the coming months.
Consumer spending, which accounts for two-thirds of all economic activity, has been an engine of the economy's growth. But consumers have been tightening the belt, contributing to the economic slowdown. The government reported Wednesday that the economy slowed to a growth rate of just 1.4 percent in the fourth quarter of 2000, the weakest performance in more than five years, as spending on cars, computers and other costly goods fell. While the weakening economy has really hurt some sectors, such as manufacturing, construction activity has remained stable, helped in part by cheaper borrowing costs. Construction spending increased by 0.6 percent in December, following a revised 0.2 percent gain the month before, much stronger than the government previously reported, another report showed.