How Supply Managers See High Business
Staff -- Purchasing, 5/17/2001
- Advance estimate places the first-quarter real GDP growth rate at a stunning 2%. That's an improvement from the 1% growth rate logged in fourth quarter 1999 and exceeds the consensus expectation by 1-2 full points (depending on which consensus you look at). Consumer spending for durable goods—houses and cars—was the main source of growth. Inventories fell for the first time since third quarter 1991 (a negative for GDP but a big plus for renewed growth later in the year). Business investment fell, but comprises only a small portion of GDP compared to consumer spending. Reaction: While the good news was welcomed by all, some expressed fears of consumer retrenchment in the second quarter.
- It's improbable that the Fed's massive interest rate cutting—200 basis points in the first four months of this year—will fail to produce an economic rally once the usual lag time lapses. Recent news reports have at least one Fed official suggesting the typical lag time may be shrinking as markets become "more anticipatory."
- Good news from the factory sector. Total industrial production gained four-tenths of a point in March; manufacturing output advanced 0.3%, the first monthly increases for both indicators since last September. Motor vehicles (+7%) and, surprisingly, high-tech sectors (+0.9%) led the gain in manufacturing. Without these two segments, manufacturing output shows a 0.2% decline, suggesting that many materials segments remain burdened with too much inventory.
- Layoff announcements take toll on consumers' nerves. The Conference Board says its Consumer Confidence Index fell eight points last month, erasing the March rally. The bad news: Consumers claiming jobs are "hard to get" rose from 12.6% to 14.2%. Those reporting jobs as plentiful fell from 43.8% to 40.0%. Percent expecting fewer jobs to become available in the coming six months crept up to 23.2 from 20.4 in the month prior.
| INDICATOR | PERIOD | LATEST PERIOD | PREVIOUS PERIOD | YEAR AGO | ANNUAL % CHG* |
| Real GDP (B96$,SAAR) | Q1 Advance | 9439.9 | 9393.7 | 9191.8 | 4.3 |
| Consumer spend, dur gds | Q1 Advance | 921.5 | 896.0 | 898.2 | 6.5 |
| Bus investment, equip | Q1 Advance | 1146.7 | 1152.7 | 1100.4 | 10.7 |
| PC board book-to-bill (ratio) | Mar | 0.70 | 0.79 | 1.21 | |
| Semi equip book-to-bill (ratio) | Mar | 0.64 | 0.73 | 1.46 | |
| High-tech IP** (92=100) | Mar | 1379.7 | 1368.0 | 1048.6 | 49.9 |
| Emp cost index (6/89=100) | Q1 | 152.3 | 150.6 | 146.4 | 4.2 |
| Dur gds orders ($B, SA) | Mar | 205.1 | 199.0 | 219.2 | 3.2 |
| Consumer conf (85=100) | Apr | 109.2 | 116.9 | 137.7 | -5.7 |
| * Rate-of-change for year ending with latest period reported. ** Industrial production of computers + communication equipment + semiconductors | |||||
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