Center for Business and Economic Research - Ball State University


CBER Data Center
Projects and PublicationsEconomic IndicatorsWeekly CommentaryCommunity Asset InventoryManufacturing Scorecard

About

Commentaries are published weekly and distributed through the Indianapolis Business Journal and many other print and online publications. Disclaimer

RSS Feed

Disclaimer

The views expressed in these commentaries do not reflect those of Ball State University or the Center for Business and Economic Research.

Recent

Two Key Economic Lessons in One BillHoosiers face trade-offs and opportunity costs in the wake of SEA1.

Time to Fix Economic Development PolicyAllocating tax dollars to land development won’t cause economic growth.

The Unanticipated Effects of SB1Businesses, governments and households may all feel the effects.

The Stupidest of PoliciesThis whipsawing of tariff rates has unnerved financial markets, which on Wednesday, were toying with a liquidity crisis.

View archives

Top Tags

jobs and employment 261
economics 201
state and local government 188
education 186
economic development 171
indiana 171
budget and spending 145
taxes 144
law and public policy 142
workforce and human capital 139
Browse all tags
Reporter / Admin Login

May 18, 2001

Manufacturing's Slide Continues

The decline in the U.S. manufacturing economy has not yet hit bottom, according to reports on April industrial activity released by the Federal Reserve. Although earlier reports showing rebounding consumer spending and low inventories gave hope that production schedules might pick up in the coming months, factory managers across a wide spectrum of industries saw things otherwise. The Fed's Index of Industrial Production pours some cold water on the notion that the economy has passed the danger point of slipping into recession, and gives support for the central bank's continuing aggressive moves to stimulate the economy. 

The second quarter of the year started out the same as the first for most manufacturers. The overall manufacturing index was down by 0.3 percent in the month of April, and has now dipped below its level of a year ago. That downturn has cost the U.S. economy more than a half million manufacturing jobs, and has battered the revenue intake of manufacturing-intensive states like Indiana. 

As we move past the point where the slide can be considered to be an inventory adjustment and towards something that looks more like a bona fide retrenchment, it is becoming apparent that it is the stagnation in spending by businesses themselves that is the real culprit. The love affair of American business with technology has come to a surprisingly abrupt end. 

This can be seen most dramatically by the recent performance of the electronic equipment industry, which includes most categories of computers and telecommunications equipment. Output in this sector stands at nearly 600 percent of its level in 1992, growing at a steady 20-30 percent clip for most of the years since that time. But 2001 has been a cruel surprise to high tech manufacturers like Cisco Systems and Gateway, who have collectively cut back on production for the first time in their short histories. 

But the "usual suspects" of any manufacturing downturn aren't faring any better. Steel production, suffering from declines in demand at the same time as market share is threatened by imports, is now fully 16 percent lower than this time last year. 

If business spending slackens, can an interruption in productivity growth be far behind? Fed chairman Alan Greenspan sought to reassure us that the dismal first quarter productivity report did not signal an end to the technology-led surge in operating efficiencies that have fueled so much real economic growth. 

But his actions suggest otherwise. By lowering short term interest rates by 50 basis points on the heels of a first quarter GDP report that showed the economy still growing, the Fed was clearly attacking what it sees as the most daunting challenge ahead: getting businesses to spend money. With 2001 starting out with one of the worst corporate earnings performances in recent memory, however, the best that can be hoped for  a modest pickup in capital spending  might not be enough to stop the bleeding in factories nationwide.

Link to this commentary: https://commentaries.cberdata.org/474/manufacturing-s-slide-continues

Tags: manufacturing


About the Author

Pat Barkey none@example.com

Patrick Barkey is director of the University of Montana Bureau of Business and Economic Research. He served previously as Director of the Bureau of Business Research (now the Center for Business and Economic Research) at Ball State University, overseeing and participating in a wide variety of projects in labor market research and state and regional economic policy issues. Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.

© Center for Business and Economic Research, Ball State University

About Ball State CBER Data Center

Ball State CBER Data Center is one-stop shop for economic data including demographics, education, health, and social capital. Our easy-to-use, visual web tools offer data collection and analysis for grant writers, economic developers, policy makers, and the general public.

Ball State CBER Data Center (cberdata.org) is a product of the Center for Business and Economic Research at Ball State University. CBER's mission is to conduct relevant and timely public policy research on a wide range of economic issues affecting the state and nation. Learn more.

Terms of Service

Center for Business and Economic Research

Ball State University • Whitinger Business Building, room 149
2000 W. University Ave.
Muncie, IN 47306-0360
Phone:
765-285-5926
Email:
cber@bsu.edu
Website:
www.bsu.edu/cber
Facebook:
www.facebook.com/BallStateCBER
Twitter:
www.twitter.com/BallStateCBER
Close