Manufacturing seen in decline
SIOBHAN HUGHES
Manufacturing seen in decline
Economists also expect federal reports to show higher inventories in February
By SIOBHAN HUGHES AND ALEX TANZI Bloomberg News
Monday, April 14, 2003
Washington — U.S. industrial production fell in March and lagging sales caused inventories to grow in February during the buildup to war in Iraq, economists said in advance of government reports this week.
The weakness at the nation’s factories may have extended into April. Economists said they expect separate Federal Reserve reports to show that manufacturing in New York state and the Philadelphia region are in decline this month, keeping economic growth modest because factories account for a seventh of the economy.
“Manufacturing just isn’t kicking up yet,” said Tim Rogers, chief economist at Briefing.com in Boston. “You’re not going to see that improved, or a rebuilding in inventories, until the whole economy comes back.”
That will happen gradually over the year, Federal Reserve Bank of Philadelphia President Anthony Santomero said. “With inventories lean, increases in the demand for consumer and capital goods will directly translate into increases in production,” Santomero said.
A turnaround in manufacturing would be welcome in Wisconsin, which has lost more than 83,000 factory jobs since July 2000. Wisconsin has 517,000 workers employed in manufacturing, more than any other state except Indiana.
Tuesday’s Fed report on industrial production will probably show a decline of 0.2% in March, the first drop in three months, based on the median forecast in a Bloomberg News survey of 56 economists. The central bank’s survey of New York manufacturing, set for today is forecast to show a reading of minus 1 for April, a second straight decline. Readings below zero signal contraction.
Plants and assembly lines in eastern Pennsylvania, Delaware and southern New Jersey are still struggling, as well. A reading of minus 3.5 is expected in the Philadelphia Fed’s factory index after a minus 8 in March, the first back-to-back declines since 2001, when the United States was in a recession.
Inventories at factories, retailers and wholesalers rose 0.3% in February, the Commerce Department is expected to report today, based on the median forecast of 47 economists.
The buildup in inventories may have left some companies with unwanted stockpiles, forcing factories to slow assembly lines in March and April.
With manufacturing in a rut, workers are finding it hard to hang on to jobs. The number of Americans filing new claims for state unemployment benefits probably rose to 410,000 last week, economists expect the Labor Department to report Thursday. That would be the ninth straight week above 400,000.
Increased gasoline prices probably helped push the consumer price index up 0.4% in March, the Labor Department is forecast to report Wednesday. Not including volatile food and energy prices, the index probably rose 0.2%, showing that inflation is under control, according to the median forecast.
The housing market has escaped the weakness in the rest of the economy thanks to low mortgage rates. Builders probably broke ground on new homes and condominiums at an annual rate of 1.7 million units in March, according the median forecast.
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