U.S.: Manufacturing & Consumer Data Signal Recovery [?]

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Headline: Manufacturing and Consumer Data Signal a Recovery

Source: Bloomberg News via NY Times, 2 July 2001

URL: http://www.nytimes.com/2001/07/03/business/03ECON.html

[My rude comments included in brackets.]

An index of manufacturing rose to a seven-month high in June, and consumer spending increased more than expected in May, industry and government reports showed today. The data were seen as a sign that the economy could be starting to recover.

The National Association of Purchasing Management's index increased to 44.7 last month from 42.1 in May. Last month's reading, the highest since November, was lifted by gains in orders and production. Still, a reading below 50 signals a decline, and the index has been in the 40's since last August.

"I feel like we've hit bottom, and we're coming back," said Michael Kluiber, senior vice president for global automotive business at Rockwell Automation, the largest supplier of factory automation equipment for the American auto industry. "We're still not out of the woods. But every month has been better than the month before."

[This guy is upstream in the auto industry: yet other news today was that Ford sales are down some 13%. Meanwhile, new earnings warnings from 3M, Dupont, etc., Roadway trucking income is down 59%, and see the layoffs list here on GICC...]

Spending by consumers rose 0.5 percent in May, the same level as in April and more than the 0.4 percent forecast by analysts, the Commerce Department reported. Demand for durable goods like appliances and cars jumped 1.2 percent. The report also showed that incomes grew 0.2 percent in May, the same level as a month earlier. The personal savings rate dropped to minus 1.3 percent in May from minus 1 percent in April.

Consumers are borrowing or dipping into their savings to make purchases, "an indication that people have a lot of confidence in the future of the economy," [and that they are desperate, idiots, or both] said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pa. "They are maintaining their spending in light of a pretty clear slowdown in income, especially in wages and salaries." Manufacturing wages declined for a second month and pay in other industries slowed in May, the report said.

A separate Commerce Department report showed construction spending rose 0.3 percent in May, to $881.6 billion at an annual rate, after a 0.4 percent increase in April. Spending on housing and public works led the increase.

Central bankers, economists and some company officials say they expect a recovery to have begun by the end of the year. The economy will probably grow 2.7 percent in the fourth quarter after expected growth of 0.5 percent in the second three months of the year, according to a survey of analysts. The economy grew 1.2 percent at an annual rate in the first quarter. The increase will probably come from the six interest rate cuts by the Federal Reserve as well as a tax- lowering plan enacted by Congress that includes cash rebates. The government will start mailing rebate checks on July 23.

"Consumers are doing their part to keep the economy out of recession," said Lynn Reaser, chief economist at Banc of America Capital Management in St. Louis. "The economy appears to be shaking off its slump of the past several months." [Maybe, or not.]

[More contradictory information: perhaps some numbers are cooked or misleading, as with the unemployment stats; perhaps it's the parable of the elephant: some people are feeling the snout, while others of us are feeling the tail and wondering what that warm stuff falling on our heads might be?]

-- Andre Weltman (aweltman@state.pa.us), July 03, 2001


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