How Supply Managers See Business
By Staff -- Purchasing, 2/7/2002
- At least one leading economic indicator suggests a recovery could be underway as early as Q1 2002. Growth rate for the Economic Cycle Research Institute's (ECRI) Weekly Leading Index rose to +0.9 for the week ending Jan. 11, marking its second consecutive month above zero. ECRIS research director Anirvan Banerji, who was way ahead of the pack in calling last year's recession, suggests the group's recovery call will come "very soon." At the same time, however, a Jan. 10 statement from the National Bureau of Economic Research (NBER), which dates economic recessions officially, says: "With continuing declines in employment and other indicators, there is no suggestion in the data as yet of a trough in economic activity."
- Remember the double-dip rhetoric? It's back. Some economists are now saying a return to positive GDP growth in early 2002 (if it occurs) will likely be followed by a one- or two-quarter relapse into recession. Their fear is that businesses, high on their recent successes at paring inventories, will restart production too quickly against anticipated demand growth that won't materialize because it was "stolen" in late 2001 by a combination of warm weather and aggressive price discounting by retailers.
- While economists describe the Q4 2001 inventory liquidation as "massive", it wasn't big enough to inspire new growth in factory output. Manufacturing production continued its 18-month long decline in December, falling 0.1% despite a big jump in motor vehicle assembly.
- Companies will likely be looking to their supply bases for more cost cuts in 2002. Evidence: Business economists surveyed recently by the National Association of Business Economists(NABE) suggest that downward pressure on profits remains intense, with 33% reporting falling profit margins and 45% reporting flat margins for their firms. At the same time, 19% of the NABE panel reports persistent skilled labor shortages vs. just 2% reporting shortages of intermediate inputs and zero percent reporting raw materials shortages.
| Indicator | Period | Latest Period | Previous Period | Year Ago | % Chg vs. Year Ago |
| Industrial production ( '92=100) | Dec | 136.7 | 136.9 | 145.1 | -5.8 |
| Mfg capacity utilization (%) | Dec | 72.8 | 72.9 | 78.4 | - |
| Housing starts (000s, SAAR) | Dec | 1570 | 1625 | 1532 | 2.5 |
| Housing market index | Jan | 61 | 57 | 55 | 10.9 |
| Mfg employment (000s) | Dec | 17027 | 17160 | 18349 | -7.2 |
| Producer price index (core, '82=100) | Dec | 150.4 | 150.6 | 149.3 | 0.7 |
| Consumer price index ( '82-'84=100) | Dec | 177.3 | 177.6 | 174.6 | 1.5 |
| Purchasing managers' index (mfg) | Dec | 48.2 | 44.5 | 44.3 | - |
| Purchasing managers' index (non-mfg) | Dec | 54.2 | 51.3 | 61.1 | - |
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