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Manufacturing Execs See Improved Business Most Are Optimistic About Future, Despite Asian Financial Crisis

Sun., Feb. 1, 1998

U.S. manufacturing executives expect business activity to “accelerate somewhat” during the first quarter of this year after a “slight” decline the final quarter of 1997, suggesting the impact of Asia’s financial woes on the U.S. will be limited.

The Industrial Sentiment Index for December, measuring manufacturers’ expectations for the upcoming three months, rose to 23 from 20 in November, according to a Dun & Bradstreet Corp. survey. December’s positive reading for the index means more companies surveyed expect an increase in business than expect business to slow.

The bright outlook for the first three months of this year offsets sluggish manufacturing activity during the fourth quarter of last year, Dun & Bradstreet said. The survey found “slight declines” in several key areas at the end of last year. “We are beginning to see the first concrete signs that the economic problems centered in Asia have hit America’s shores,” said Joseph W. Duncan, chief economic advisor at Dun & Bradstreet.

Still, the report showed manufacturers expect all the major indicators - production, new orders, exports, inventories and unfilled orders - to rise in the first quarter of 1998. Manufacturers also expect to see a pick-up in prices, employment levels and total unit costs, the report showed.

During the fourth quarter, executives reported “a modest retrenchment” in recent production, new orders, unfilled orders and exports, the report said. Selling prices and unit costs also declined at a moderate pace, while inventories and employment levels edged up.

At the same time, the Asia effect “is not necessarily bad news,” Duncan said. The slowdown has kept “inflation at bay, brought interest rates to historical low levels and, in turn, has freed up corporations to seek new lines of credit on very favorable terms,” he said.

In other reports reflecting economic conditions, the Cahners Business Confidence Index rose 0.7 points to 66.9 last month from 66.2 in December. January’s increase - fueled by gains in employment, production and market spending expectations - was the third increase in the index in the last four months.

And the National Association of Business Economists latest quarterly survey of 121 corporate economists, conducted in October, found that more than 70 percent said they expected their companies sales volume to increase over the next six months.


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