Manufacturing Outlook Bleak, Survey Shows

U.S. manufacturers have become significantly less optimistic about the economic outlook for the next 12 months and see scant growth in capital spending, reinforcing concern the economy may lose more momentum in the months ahead.

A semiannual survey of the nation’s purchasing executives by the National Assn. of Purchasing Management showed Tuesday that, after shrinking in recent months, the outlook for the U.S. manufacturing sector next year is bleak.

Just 35% of NAPM members said they were satisfied or optimistic about the economic outlook, compared with 56% in May and 62% a year ago. The latest sentiment reading was the lowest in more than four years.

“Manufacturing purchasers are less than bullish about their organizations’ prospects for 2000. 2001 will definitely be a challenge as far as the manufacturing sector is concerned,” said Norbert Ore, chairman of NAPM’s Business Survey Committee.

Although Ore said a recession in manufacturing was possible, he also said additional expansion in other parts of the economy probably would keep overall growth positive.

“We might have a recession in the manufacturing sector, we have a potential for that, but not a recession in the overall economy,” Ore said. A recession is usually defined by economists as two consecutive quarters of declining gross domestic product.

NAPM, which has 40,000 U.S. members and is the largest U.S. purchasing and supply management research group, said its survey showed that 60% of its members said they were concerned about the outlook for manufacturing in 2001, versus 39% expressing concern in the last NAPM survey released in May.

Only 29% of its members expect to increase their capital spending on equipment and infrastructure next year, while 32% expect to spend less.

The outlook for the non-manufacturing sector was more rosy, with little change seen in prospects for economic growth since the last survey.

NAPM said 59% of its non-manufacturing members were either satisfied or optimistic about the outlook for their sector, just a little less than the 63% in May. On the flip side, 41% expressed concern, only slightly more than the 37% in May.

These respondents were also planning more capital investment than manufacturers with 41% expecting to increase spending in 2001, versus 24% expecting a fall.

NAPM said manufacturing employment was expected to decline by 0.5% in 2001, but they expected a gain of 2.7% in the non-manufacturing sector.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Split Forecast

The National Assn. of Purchasing Management, a group of purchasing executives nationwide, said Tuesday that its members are split in their 12-month outlook: Manufacturing executives have grown increasingly concerned about the outlook, while non-manufacturing executives’ optimism remains at fairly high levels.

Source: National Assn. of Purchasing Management