How Supply Managers See High-Tech Business
Staff -- Purchasing, 10/20/2005
- The harm to the U.S. economy from two hurricanes that hit the U.S. Gulf Coast over the past month will be more modest than previously thought, the Congressional Budget Office says. The late-summer storms didn't really depress industrial activity because there was a rush of new orders from manufacturers concerned about losing supplies. In addition, prices shot up as manufacturers appeared willing to pay top dollar for the materials and goods they needed for production. Proof: Institute of Supply Management's index of U.S. factory activity rose to 59.4 in September from 53.6 in August. Likewise, PURCHASING magazine's business index rose to 64.0 from 61.4. Both indexes are based on 50; a reading above 50 signals expansion, while a reading below 50 indicates contraction.
- Orders for new U.S.-made goods increased 2.5% in August, suggesting the economy had momentum before two hurricanes battered the Gulf Coast. And spurred by computer demand, durable goods orders placed with U.S. factories increased 3.3%. Commerce Department data shows orders for computers and electronic products rose a solid 5.5%. Overall nondefense capital goods rose 4.3% with big gains reported by makers of civilian aircraft. Shipments of durable goods increased 1.7% in August to their highest level since 1992.
- The global economy should grow at a good rate over the next year and a half, but "downside risks have increased," said Raghuram Rajan, chief economist of the International Monetary Fund at a recent press briefing. The IMF projects 2005 global growth of 4.3% in both 2005 and 2006. However, Rajan cautions that increased energy prices raise the risk of higher inflation, leading to higher interest rates and slower growth in Europe, the U.S. and China.
- Hurricanes Katrina and Rita have driven already-high energy prices into another layer of the stratosphere, pinching some consumers' discretionary incomes. That's why the consumer confidence index produced by the Conference Board, a private research firm, plunged to 86.6 in September from 105.5 in August. The reading also confirmed signals from these surveys that there is a pending slowdown in consumer spending, which fuels more than two-thirds of the total U.S. economy.
- The Baltic countries look to be adopting the Euro in the coming years. Recent news reports out of the region say Lithuania may adopt the currency as early as 2007, with Estonia and Latvia coming in 2008 and 2009 respectively. A report from SEB Vilniaus Bankas says the Baltic economies will grow faster than any other in Europe through 2007.
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