How Supply Managers See Business

Staff -- Purchasing, 11/4/2004

• The soaring costs of steel and oil, a common theme in the latest batch of corporate earnings reports, are throwing a wet blanket on manufacturers' third-quarter results. The baleful moan from the nation's factories has been telegraphed to Wall Street well in advance by producers being hammered by the rising cost of raw materials and energy. And that won't be changing anytime soon, if forward-looking comments from some of these companies are any indication. The impact of rising steel costs has continued to echo through this earnings season's conference calls: Steel prices jumped to $756 per net ton for the industry benchmark hot-rolled steel sheet in the third quarter from $290 a year ago.
• After falling throughout the summer, business confidence stabilized in September but slipped a bit further in mid-October. The renewed softening in sentiment is broad-based across the globe and most industries, according to Economy.com, which surveys business leaders monthly. Confidence has weakened across the globe since the spring, but it is down most significantly in Asia.
• Lehman Brothers analysts insist the aviation sector is about to improve, just as soon as demand for jetliners perks up. "High fuel is a real problem for all the world's airlines, but it won't stop world traffic from continuing to grow," the brokerage argues. "After three years of absolutely no growth in traffic, the world is ready for several years of steady traffic growth." But, Banc of America analyst Nick Fothergill frets about the high oil prices, worsening U.S. and European airline news and the fact that new orders for Boeing's 7E7 have been slower than expected.
• The outsourcing of U.S. jobs overseas is proceeding at an accelerating pace, especially to India and China, according to a new study by Cornell University and the University of Massachusetts at Amherst. The report says unionized workplaces are impacted disproportionately by the production shifts—with almost 40% of all jobs being shifted out of the country from unionized facilities—and that the Bureau of Labor Statistics "grossly underestimates" the number of jobs being lost overseas.
• Higher costs for imported crude oil already have had negative consequences on the nation's economy, Federal Reserve Board chief Alan Greenspan concedes. So far this year, "the rise in the value of imported crude oil-essentially a de facto tax on U.S. residents-has amounted to about three-quarters of one percent of GDP (gross domestic product)," Greenspan told the National Italian American Foundation. That's why economists have lowered the GDP growth forecast for this year to 4.3%.