- The Washington Times - Saturday, March 16, 2002

ASSOCIATED PRESS
America's struggling manufacturers, who have seen hundreds of thousands of jobs evaporate during the recession, appear to be mounting a comeback.
Industrial production at the nation's factories, mines and utilities rose 0.4 percent in February, the strongest gain since the summer of 2000, right before the industrial slump began, the Federal Reserve said.
"At last, manufacturing is back in the black," declared Jerry Jasinowski, president of the National Association of Manufacturers.
A second report yesterday showed that the U.S. economy's fledgling recovery isn't triggering inflation. Wholesale prices rose a modest 0.2 percent in February, while the core rate of inflation, which excludes volatile food and energy prices, was flat, the Labor Department said.
The latest conomic news provided further evidence that the economy, jolted by the September 11 terrorist attacks and a recession that began in March 2001, is on the mend.
Manufacturing has been the weakest part of the bruised economy. If a turnaround in the sector is sustained, that may help power a potentially stronger economic rebound than Federal Reserve Chairman Alan Greenspan is anticipating, some economists said.
"Maybe he should start rethinking his slow-recovery theory," said economist Joel Naroff of Naroff Economic Advisors.
The Federal Reserve, which slashed interest rates 11 times last year to prop up the economy, meets Tuesday to discuss interest-rate policy. Many economists expect the Fed to leave rates alone, just as it did in January. But some believe the Fed will change its current policy directive, which holds the door open to rate cuts in the future, to one that suggests the Fed may be staying on the sidelines.
Having cleared out excess stocks of unsold goods, which had piled up during the slump, factories are in a position to boost production and perhaps bring back some laid-off workers later in the year, analysts said.
"Manufacturing has turned around 180 degrees," said economist Clifford Waldman of Waldman Associates.
The 0.4 percent increase in industrial production, the largest gain since June 2000, came after a 0.2 percent rise in January. That marked the first back-to-back increases since August and September 2000.
At factories, production rose 0.3 percent for the second straight month, lifted by gains in the production of steel, computers, semiconductors, paper, chemicals and tobacco. Automobile production dipped 0.2 percent in February, but still was an improvement over January's 1.6 percent drop.
Output at gas and electric utilities went up 2.7 percent last month with the return of more normal winter weather, after falling 0.3 percent in January. Mining production declined again, sinking by 0.7 percent in February.
The Fed's report is consistent with other recent economic data. The Institute for Supply Management reported that manufacturing activity had flashed a growth signal in February. Government reports show that orders to factories for big-ticket manufactured goods, such as cars, have been picking up.
In the inflation report, a 4.5 percent rise in gasoline prices, the largest advance since September, contributed to the increase in overall wholesale prices last month.
For the 12 months ending in February, wholesale prices fell 2.6 percent.
as the weak economy forced companies to either cut prices or keep a lid on increases.
Declining wholesale prices have squeezed companies' profits, which took a hard hit during the slump.
With the economy rebounding, some economists project the Fed may need to raise rates later this year, perhaps in June, if growth is robust enough to lead to an outbreak of inflation.
"I think we should view the wholesale prices we are seeing now as kind of a bottom," said Sung Won Sohn, chief economist at Wells Fargo. "Inflation is likely to be a bit higher in the future."


Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide