How Supply Managers See Business

Staff -- Purchasing, 10/7/2004

• Contractors' assessment of the market for new homes slipped in September. The Housing Market Index of the National Association of Home Builders fell to 68 in September from 71 in August. However, the group's chief economist, David Seiders, remains optimistic that sales will stay healthy in coming months.
• The federal budget deficit is expected to widen to a record $422 billion in fiscal 2004, the nonpartisan Congressional Budget Office forecasts. The projection would surpass last fiscal year's $375 billion shortfall. For fiscal 2005, which began on Oct. 1, the deficit likely will shrink to $348 billion, says the CBO. The fiscal 2004 deficit represents 3.6% of gross domestic product. In fiscal 2005, the deficit is expected to ease to 2.8% of GDP.
• Weaker-than-expected U.S. regional industrial surveys appear to have confused the economists who track manufacturing. Various Federal Reserve Board and private surveys show that midwest and mid-Atlantic factory activity slumped in September, spurring fears that the economy's summer lull could extend into the fall. Upshot: "There is confusion among economists and financial markets as to where the economy is headed," says Kathy Lien at Forex Capital Markets in New York.
• Executives in several metalworking sectors contend the industrial recovery is real, but they are still treating the manufacturing environment with some caution. Steel and nonferrous metals executives, for example, told an outlook conference in Chicago that there will be a full-year pickup in demand for their products—but admit sales for the second half aren't looking as robust as they were in the first half.
• Corporate executives plan to increase capital spending 4.7% in the next 12 months—a relatively modest pace, according to a quarterly survey of chief financial officers by the Fuqua School of Business at Duke University. The survey also finds that finance chiefs have reduced their expectations for overall U.S. economic growth.
• Microchip equipment utilization rose sharply last year, but for most of this year it has been stuck, with chip companies operating at about 79% of production capacity. Part of the problem, says strategist Vadim Zlotnikov at Sanford C. Bernstein, is that sales of chip-based high-tech are being driven by replacement demand rather than demand for cutting-edge products.