How supply managers see business
Staff -- Purchasing, 8/14/2003
- The economy is more likely to grow faster than expected rather than slower, according to nearly three in four (73.3%) professional economic forecasters surveyed by Blue Chip Economic Indicators last month. None of the economists believes there's a high risk of outright deflation in the U.S.; only one in five believes there's even a little risk of an outright deflation.
- Economists aren't worried about a general deflation because prices are still rising for things like insurance, school tuition, cable TV, and healthcare—industries where productivity growth is notoriously hard to achieve. In the manufacturing sector, however, producers have clearly lost pricing power over the last year even as their costs for things like energy and energy-derived materials have risen. Even as growth turns stronger in second half 2003 and first half 2004, manufacturers will be hard put to boost earnings and that's going to keep intense pressure on buyers to reduce input costs.
- Fiscal belt tightening at state and local levels could offset up to one third of the economic stimulus provided by new federal tax cuts, according to Global Insight economist Nariman Behravesh. "With 49 out of 50 states (Vermont is the exception) constrained by law to enact balanced budgets, state and local governments have been engaged in pro-cyclical tax hikes and spending cuts," he notes. "More than half of the states are expected to raise taxes next year and state spending is expected to fall for the first time since 1983."
- It's official. The recession that started in March 2001 ended in November of the same year, according to the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER). Note: That's the same month PURCHASING magazine's Business Activity Index reached its nadir of 33.0. ISM's Purchasing Managers' Index for manufacturing hit its low point a month earlier in October 2001.
- Forty-four percent of firms expect to increase capital spending over the coming 12 months, according to National Association of Business Economists' Industry Survey. Strongest growth will come from financial companies, where 61% plan higher spending and none plan cuts. Among manufacturers, 45% plan increases against 30% planning cuts.
| Indicator | Period | Latest Period | Previous Period | Year Ago | % Chg vs. Year Ago |
| Industrial production ('92=100) | June | 109.7 | 109.6 | 110.8 | -1.0 |
| Manufacturing capacity utilization (%) | June | 74.3 | 74.3 | 74.1 | 0.3 |
| Housing starts (000s, saar) | June | 1803 | 1738 | 1692 | 6.6 |
| Housing market index | July | 64 | 62 | 61 | 4.9 |
| Mfg employment (000s) | June | 14695 | 14751 | 15334 | -4.2 |
| Producer price index (core, '82=100) | June | 143.1 | 142.1 | 150.2 | -4.7 |
| Consumer price index ( '82-'84=100) | June | 183.7 | 183.5 | 179.7 | 2.3 |
| Purchasing managers' index (mfg) | July | to come | 49.8 | to come | to come |
| Purchasing managers' index (nonmfg) | July | to come | 60.6 | to come | to come |
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