Manufacturing Growth Stagnates

[Nov 5, 2007.]

New statistics from an industry trade group reveal that growth in the country's manufacturing sector is stagnating.

The Institute for Supply Management reports that manufacturing growth in September was slower than anticipated. The official rate clocked in at 52.0 last month—that's down from the 52.9 rate in August. In fact, it was the lowest rate since the 50.9 recorded in March.

Still, the fact that the rate was above 50 indicates the economy continues to grow—although at a slower pace than had been expected.

Meanwhile, investors are predicting that the Federal Reserve will cut interest rates yet again. Anticipating that scenario, the Dow Jones Industrial Average rose, with the blue chip index reaching a record high of 14,056.09. Last month, the Fed reduced a benchmark interest rate for the 1st time in four years' time. The Fed is expected to meet again at the end of October, when it could cut rates again by a quarter of a point or more.

Meanwhile, analysts say that there are a number of pluses in the manufacturing sector at this time. These include the aerospace industry and the manufacture of electrical equipment and machinery. However, car sales have been slow, while the downturn in the housing market has depressed demand for construction materials. The appliance and furniture sectors have also been hard-hit by the national housing crisis. Overall, though, the manufacturing sector appears to be faring well in terms of inventory.

Some experts are saying that the economy remains quite delicate, meaning that recession is still a possibility. However, so far, the housing slump has not led to a nationwide recession, although the troubles in the subprime loan market have caused great concern. Subprime loans are those loans extended to people with shaky credit histories.

Nearly a dozen industries are reporting growth, including clothing, petroleum, plastics and rubber products, food products, and computer products.

Julie Ann Amos
November 5th 2007

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