Economic rebound seen in latest purchasing and consumer figures

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Manufacturing News, Source : The Manufacturer US
Published : 12 Jun 2002 9:46

Data released by a number of sources at the end of last month indicates the beginning of a sound economic recovery.

In addition to an increase in gross domestic product rates and new orders for manufactured goods (see related stories next page), manufacturing figures for the Midwest surged to a three-year high, the Labor Department reported a rise in productivity ratings, and surveys show consumer confidence is on the rise.

According to the National Association of Purchasing Management-Chicago, its index is at the highest level since April 1999. In April of this year, the index was 54.7; it rose to 60.8 in May. The May reading marks the fourth month the index was over 50, indicating regional factory growth. The new orders index hit 65.6, a three-year high, and although the jobs index remained below 50, it hit a two-year high at 47.3.

The Labor Department reported that productivity ratings escalated to 8.4% during the first quarter of 2002. This jump marked the biggest increase in 19 years. “Coming on the heels of the robust 5.5% growth in productivity reported for the final quarter of 2001, it suggests strongly our economy is bouncing back,” said Jerry Jasinowski, president of the National Association of Manufacturers, in response to the report. “Productivity is key to economic growth without inflation. This will encourage the Federal Reserve to keep interest rates low.”

Half a million jobs have been lost in the manufacturing sector in recent times due to weak exports and the overvalued dollar, said Jasinowski. With productivity up, manufacturers can work toward increasing labor and building a more competitive edge. Employment ratings in the manufacturing sector are currently leveling off from its previous decline, and the labor ratings in manufacturing are expected to improve later this year, he said.

On the consumer side, The University of Michigan reported their May consumer sentiment index rose from 93.0 in April to 96.9 in May, beating forecasts and the preliminary May reading of 96.0. The survey is based on telephone interviews with 500 Americans on buying conditions and personal finances.

The Conference Board’s Consumer Confidence Index also rose in May. It stands at 109.8, up from 108.5 in April. However, the Expectations Index fell slightly to 109.4, compared with 109.6 in April. “Consumers’ upbeat mood about current business and labor conditions underscores the economy’s continuing recovery, but the latest retreat in expectations suggest that the pace of economic growth will not accelerate in the months ahead,” said Lynn Franco, director of the board’s Consumer Research Center.