Posted on 12/02/2003 3:30:48 PM PST by Tumbleweed_Connection
American manufacturing activity rose to its highest level in nearly 20 years last month as factories raced to keep up with demand and indicated a readiness to expand their work forces for the first time in three years, according to a survey published on Monday. In the latest good economic news, the Institute of Supply Management reported that its November survey of purchasing managers showed a surge in new orders and a big jump in production in almost every industry. The institute said its overall index of manufacturing activity climbed to the highest level since December 1983, an increase much greater than most economists expected. But the bigger surprise was that manufacturers showed a wider readiness to hire workers after three years of reducing factory payrolls. Major stock indexes rose yesterday to the highest levels in 18 months, with the Dow Jones industrial average rising 1.19 percent as investors became more convinced that the robust economic growth this summer was more than a one-time event. Speaking at a fund-raising event in Dearborn, Mich., President Bush said his strategy of lower taxes had helped revive the economy. "Our economy was strong and it is getting stronger," Mr. Bush said. "Productivity is high; business investment is strong; housing construction is strong. The tax relief we passed is working." The positive news is tempered somewhat by the federal budget deficit, which is expected to reach $500 billion next year as growth is financed in large part with borrowed money, and by a lofty trade deficit. Still, the new survey of manufacturing activity came on the heels of other reports indicating that the economy grew at an annual pace of 8.2 percent in the third quarter and the job market had begun to revive. Economists said the data provided evidence that growth would continue to be strong next year, long after the effects from this year's tax cuts and the Federal Reserve's recent most reduction in interest rates wear off. "I think this speaks to the strength of the economy right now, but it also speaks to the confidence of companies," said Norbert J. Ore, director of procurement at the Georgia-Pacific Corporation and chairman of the Institute for Supply Management's survey committee. The institute said its index of manufacturing activity, computed from answers that purchasing executives provide about the pace of business activity, jumped to 62.8 from 57 in October. A reading above 50 signals that factory production is expanding rather than contracting. If it were to continue at the November level, the institute said, the index would correlate to overall annual economic growth of 7.3 percent. Companies participating in the survey reported exceptionally big jumps in new orders as well as backlogs, both of which suggest that output will continue to rise robustly. The buoyant conditions came through in 18 of the 20 sectors of manufacturing surveyed by the institute. The optimism ranged from producers of computers and office equipment to manufacturers of building materials, chemicals and machine tools. Two other reports provided additional evidence of stronger growth. The Commerce Department reported on Monday that construction activity grew faster than many experts predicted. The value of building projects under way in October reached $922 billion, a monthly high. The increases were varied, in areas including residential construction, public works and commercial building. Economists at J. P. Morgan said data from Europe and Asia showed that the global pace of manufacturing was picking up, as well. It said its global index of manufacturing activity had signaled an expansion for the last five months, with the United States and Asia leading the way. The survey, which economists view as particularly important, provided evidence that a three-year deep slump in manufacturing is drawing to a close. American manufacturers have shed more than two million jobs since fall 2001, with many of the lost jobs in industrial swing states like Pennsylvania, Ohio and Missouri. The encouraging economic data came at an opportune moment for President Bush, who is expected to anger steel makers this week by announcing the end of special tariffs against imported steel. And while the job market had begun to improve modestly in August and September, that had occurred in service industries. The new survey announced on Monday provided the first evidence that manufacturers were finally poised to start hiring as well. Economists are now fixing their attention on the next crucial piece of economic news: the Labor Department's monthly report on employment, which is to be released on Friday. Forecasters are predicting an increase in November of about 125,000 jobs, roughly in line with the job growth in the previous two months. Though representing a turnaround from the steady stream of job losses before this fall, the economy needs to generate more than 200,000 jobs a month before the unemployment rate begins to drop significantly. The increasingly clear evidence of economic growth poses a tricky choice for the Federal Reserve, which has contributed mightily to current growth by reducing short-term interest rates to their lowest level in 45 years. The federal funds rate for overnight loans between banks is 1 percent, and Fed officials have said since August that they would keep interest rates low for "a considerable period." But that open-ended commitment to easy money has already generated disagreement within the Fed, and every additional sign of renewed economic growth puts Fed officials under more pressure to resume tightening monetary policy. Despite the upbeat news about manufacturing, the United States' recovery remains dependent in large part on borrowed money. The budget deficit is expected to reach $500 billion next year and remain high for the foreseeable future. At the same time, the United States continues to run extremely high foreign trade deficits. The deficit in the nation's current account, the broadest measure of the financial relationship with the rest of the world, is expected to run about $500 billion this year. That is a level of indebtedness that most economists consider unsustainable, and it is a big reason that the dollar has steadily lost value against the euro and other major currencies. For American manufacturers, the declining dollar has provided a welcome boost because it makes American products cheaper in other countries. But a weak dollar leads to higher prices for imported goods, which can feed the rate of inflation, and it can push up long-term interest rates as foreign investors demand higher returns to offset their currency risk. Investors, though, focused yesterday on the manufacturing index. The Dow's gain, of 116.59 points, to 9,899.05, left it at its highest level since May 31, 2002. The broader Standard & Poor's 500-stock index rose 11.92 points, or 1.13 percent, to 1,070.12, its highest close since May 28, 2002. The technology-focused Nasdaq composite index climbed 29.56 points, or 1.5 percent, to 1,989.82, its best close since Jan. 15, 2002, nearly two years ago. Oracle, Apple Computer and Nextel were among the large Nasdaq stocks posting gains of 3 percent or more. The economy has been buoyed by consumer purchases for most of the last three years as many businesses cut back after the stock market bubble burst and industries, notably technology and telecommunications, were left with excessive capacity. But recent news has indicated that economic strength is spreading from consumers and housing, which remained at high levels throughout the recession and recently rose to record levels, and that was reflected in the stock market Monday. The Morgan Stanley cyclical index, which includes stocks that are deemed most dependent on a strong economy, rose 1.8 percent Monday, with companies like International Paper, U.S. Steel and PPG Industries, a diversified producer of chemical and industrial products, all gaining at least 4 percent. U.S. Steel's advance came despite the widespread reports of the imminent demise of the steel tariffs. Thomas Usher, the chief executive of U.S. Steel, said that would "create an uncertainty going forward," according to Bloomberg News. But it apparently did not bother investors. Retail stocks did less well. The Morgan Stanley retail index rose only 0.5 percent, with major sellers like Circuit City, Wal-Mart and Toys "R" Us losing 2 percent or more. Some analysts said the holiday shopping season got off to a weaker start than many had expected. But J. C. Penney and Payless ShoeSource each rose more than 3 percent, as most retailers showed gains in their share prices. Boeing was one of four stocks in the Dow industrials to decline, falling 37 cents, to $38.02, after its chief executive, Philip M. Condit, resigned days after two other officials were forced out amid an investigation into the way the company sought an Air Force contract. In the bond market on Monday, Treasury bonds declined on the manufacturing news. By late in the day, the benchmark 10-year note was down 1632, to 98 2832. The note's yield, which moves in the opposite direction from the price, climbed to 4.39 percent from 4.33 percent on Friday. Following are the results of yesterday's Treasury auction of three- and six-month bills.
This is life threatening.
Tommie Daschle, Pattie Buchanan and Willie Green will be so saddened.
The shills keep posting multiple variations of this same lame propaganda. But they can never explain the discrepancy that this survey claims that the Textile and Apparel sectors are experiencing "growth" when the obvious facts are that they're being decimated by imports.
WE'RE DOOMED!
Wait a minute! I thought we didn't do manufacturing in this country any more! I don't know how many pessimistic Freepers have told me that the manufacturing jobs have all gone away and that we all will be flipping burgers for people who can't afford to buy them!!
How can this be? Manufacturing at the highest level in 20 years!!! I haven't even seen soup lines yet, or the Chinese triumphantly marching through main st.
I guess it was all a mistake.
They'll be in good company...many Republicans will also be screaming louder.
No kidding!
I invite anyone who thinks we don't do "manufacture" anymore in this country to take a look at Caterpillar's stock price (CAT) over the last 12-months. Have a look at John Deere's (DE) as well.
The fact is we still do upper-end, precision manufacturing and have indeed lost many minimum wage manufacturing jobs that can not remain competitive.
I'll take CAT
So the "manufacturing" report is actually morphing into a warehousing and distribution report?
That figures. What a bunch of number-juggling weasels.
No wonder we have S&L failures and Enron scandals.
http://www.nam.org/
In fact, production worker wages and benefits are only 11 percent of the cost of U.S. manufactured goods, on average.
Only 8 percent of China’s imports come from the United States. The European Union sells considerably more to China than we do.
only 10 percent of U.S. offshore manufacturing production is exported back to the United States.
Less than 5% of U.S. global foreign direct investment in manufacturing is going to China.
three percent of U.S. imports from China came from U.S. manufacturing affiliates there.
imports into the United States by all multinationals (U.S., European, Japanese, etc.) from their Chinese affiliates account for only 20 percent of total imports from China.
To prevent more U.S. companies offshoring to China there is a need to "have market-determined currencies and a better investment environment in the United States."
How do the Chi-coms operate their version of capitalism? Currency Manipulation, Subsidized Exports, Counterfeiting and Ineffective Enforcement of IPR Protection, Manipulation of VAT and Other Taxes, Inappropriate standards and product testing requirements,
In 2003, China is set to become the world’s 3rd largest importer but the United States only has an 8 percent share of all Chinese imports.
U.S. tariffs on manufactured goods average less than 2 percent, while in many parts of the world U.S.-made goods face tariffs 10-15 times higher -- or even more.
If you are not already savvy about these matters there are lots of interesting things in the testimony. A pdf file.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.