Manufacturing activity has slowed sharply in the past two months, according to reports from the Federal Reserve, but the costs of raw materials have risen, according to surveys by PURCHASING. Various bellwether surveys show that growth in manufacturing activity decelerated in August—as more firms reported slower business than reported stronger business. Upshot: "Corporate managers are cleaning up their balance sheets, cutting costs and postponing their expansion plans," says economist John Youngdahl at Goldman Sachs in New York.

The polls find purchasing managers somewhat surprised with the overall upward midsummer trend in commodity pricing. Industries that report paying higher prices this summer include makers of rubber and plastic products, fabricated metal goods, wood and metal furniture, sporting goods, industrial and commercial equipment, transportation and offroad equipment and machinery. PURCHASING's Industrial Supplies Price Index ( ISPI , 1992=100) registered at 113.9 in August, close to July's revised 114.2. The index averaged 111.5 in the second quarter and 105.3 in the first quarter.