NAPM Says Economy Still Up
Signs of things staying positive were in new orders, where NAPM’s index of business improvement doubled to 30, up from 16. The index of purchases, which measures activity in the purchasing offices, came in at 10, up considerably from –2.
There were still a couple disappointments: one in the production index, which flattened to 6 from 10 and another in the employment index, which remained positive but dropped down to 3 from 10.
“All in all this is the best report we have recorded in many months,” said Brian Long, with NAPM. “This is our second consecutive positive report. Let’s hope that our next report will look as good.”
On the steel front, the systems segment of the steel furniture business is still flat and recovering very slowly. However, the non-systems part of the steel furniture business is in full recovery, Long said. NAPM’s automotive parts producers reported mixed conditions based on “zigzag” demand from their major customers.
Capital equipment firms were again slightly positive while industrial distributors were mixed. On the balance, Long said, there were considerably more firms reporting better business conditions than last month in all categories.
“With interest rates at a 45-year low and the main thrust of the war now past, what is holding us back? Why aren’t we booming again? Many firms geared up for an end-of-war rally, only to find that the economy remains sluggish,” said Long. “We have technically been out of the recession for over a year, and even the second quarter of 2003 showed GDP growth to be at an estimated 2.5 percent. But people are still waiting for more growth before they believe that the economy has returned to normal.”
He added that several factors are still holding the economy down, although business confidence still seems to be the biggest culprit. Business leaders are not as pessimistic as they were a year ago, Long said, but they are still waiting to be buried under new orders before investing in new capital equipment or hiring new people.
On the local scene, the survey has been softened by lower automobile sales. While Long said the summer season is always interrupted by the proverbial model changeover period in July, for the last five years or so this period was very short or non-existent. In some cases this year’s down time was close to a month.
Because of the huge numbers of unsold cars, trucks and SUVs still sitting on lots, Long said, auto parts producers are approaching the fall with a great deal of caution.