How Supply Managers See High-Tech Business
Staff -- Purchasing, 10/21/2004 2:00:00 AM
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Susan Bies, a Federal Reserve governor, has an upbeat assessment of the U.S. economy, saying both the household and business sectors appear to be in good shape. "I expect that economic activity will continue to expand at a solid pace for the remainder of the year," Bies tells a Bond Market Association meeting. While there were "pockets of financial stress" among households, Bies says "the sector as a whole appears to be in good shape." For businesses, conditions have been helped by low interest rates, restructured liabilities, cost-cutting and productivity that had boosted profits, she adds.
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The composition of growth depicted in the revision to U.S. second-quarter gross domestic product to 3.3% is encouraging, says Robert Brusca, chief economist for FAO Economics. Steady growth in spending on services could "enhance the chance of job growth," because productivity is lower in the service sector than in manufacturing. Upward revisions to capital spending are also very encouraging. On the worrisome side, Brusca wonders if the buildup in inventories is desired or is being forced on firms by slower-than-expected sales.
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The global economic outlook is healthy but looks less solid, the International Monetary Fund says. Higher crude oil prices forced the IMF to trim its forecast for growth in 2005 to 4.3%, down from expected growth of 5% this year. "Still, these are very healthy global numbers," says IMF's chief economist, Raghuram Rajan, "though given the continuing volatility in oil markets, the risks to the forecast are on the downside."
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Economists at Action Economics are increasing third-quarter estimates for growth in gross domestic product. Reason: The recent sizable upward revision to July and August consumer spending. "Consumption is likely to post 4.3% real growth in the third quarter, which is much stronger than most analysts had assumed," they write on their Website. "Our Q3 GDP estimate of 4.5% may need to be revised higher."
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Consumer confidence fell unexpectedly in September for a second straight month amid concern about current economic conditions and rising oil prices. New York-based Conference Board's Consumer Confidence Index fell to 96.8 from 98.7 in August. "If consumers don't cheer up, the economy is in danger of losing traction again,'' says Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi Ltd. in New York.
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