U.S. manufacturing expanded in February for the first time in nine months, adding fuel to an economy benefiting from rising incomes and increased construction spending. The National Association of Purchasing Management's factory index, released last week, rose to 52.4 in February -- from 49.5 the month before -- as production, orders and hiring gained. It was the best reading since April's 52.5.
Does this mean, as some economists proclaimed, that the manufacturing slowdown is over? Or are the problems of Asia, Latin America and a slowing Europe still lurking in the wings? Are there sectors that are particularly strong and others that remain weak?
Robert E. "Bob" Lee
President, CEO, Hunt Valley-based Millennium Inorganic Chemicals
We see the U.S. economy as being still relatively strong -- not gangbusters, but holding its own with strong growth and employment. Asia has problems and Latin America does, too. The European economy appears to be slowing. The U.S. is still absolutely solid as a foundation. We were blessed to have experienced particularly strong growth last year, but we acquired two businesses [which boosted sales]. We expect internal growth to be relatively slight for 1999 but we expect some growth, which will give our people the confidence to go out and buy cars, appliances and homes like everyone else.
Senior economist with Towson University's RESI unit
Clearly, we have yet to see a firm recovery in overseas markets. Yes, they are currently stabilized. And yes, the worst may be over. But, judging from the trade deficit, the demand for U.S. products has yet to fully rebound. In this, the eighth year of the economic expansion, the economy certainly is beating all economic forecasts.
Despite continued softness in Latin America, Asia and much of Europe, the outlook remains bright, judging from continued orders for American manufactured products -- particularly aircraft. We're benefiting from the rare mix of low inflation, low interest rates and low unemployment.
Ironically, the seeds of a slowdown may have been sown in the fourth quarter of 1998 and the early months of 1999. If the labor-force tightening continues and if, in particular, the Federal Reserve tightens at its May meeting, that could set the stage for a slowdown in the second half of 1999.
Lacy Hunt
Senior economist, Hoisington Investment Management Co. in Austin, Texas
Basically, the global manufacturing sector is doing quite poorly. We have serious trouble in Asia, Eastern Europe and, now, Latin America. The U.S. swing upward goes against the massive overcapacity the world over. There are growing signs of faltering aggregate demand: Sixty percent of the world's economies are in recessions and the dollar continues to make significant gains against a lot of these currencies. Despite all the hoopla, the euro [introduced at the beginning of the year] has gone from 117 [to the dollar] to 109. From its introduction date, it's lost 7.1 percent of its value.
So far, the U.S. has really benefited from the miseries of the rest of the world, with wave after wave of low-priced goods coming into the U.S., which is beneficial for consumers since it cuts costs to live here.
I think the uptick in the dollar [which makes U.S. goods more expensive in foreign markets, thus slashing demand], is still interesting from the perspective of America's excess capacity, which means the manufacturing sector is not out of the woods.
Paul Engle
Manufacturing consultant, Grant Thornton LLP in Baltimore
I've done a relatively informal and unscientific survey of manufacturers here in Maryland and with some of my contacts in the electronics industry. What I've found is that, in the electronics industry, in Maryland and elsewhere, certain segments remain strong: Anything involved with telecommunications or networking are seeing continued strong demand. That's a trend that's been going on for several years.
But the broader electronics industry remains soft, primarily as a function of what's been going on in Asia for the past 12 to 18 months. The expectation is that this will continue to be flat -- primarily PCs, consumer electronics, those kinds of things.
When you get outside the electronics arena, people are forecasting a strong market, but not with rapid growth -- just solid.
Pub Date: 3/07/99