November 1, 2001
Source: The National Association of Manufacturers
The nation’s manufacturers foresee very little economic growth through the first half of next year, and only modest gains thereafter, according to a survey of the board of director of the National Association of Manufacturers taken at their semi-annual meeting October 30-31.
President Bush met with the NAM directors, promising to work with business to get the economy growing again, and calling upon Congress to quickly enact economic stimulus legislation. The directors were addressed also by Secretary of State Colin Powell, Secretary of the Treasury Paul O’Neill, Secretary of Commerce Donald Evans, Senator Ted Kennedy (D-MA), and Environmental Protection Agency Administrator Christine Todd Whitman, among others.
"Coming on the heels of yesterday’s reported decline in Gross Domestic Product, the expectations of the CEOs reflected in the survey paint a grim picture of the months ahead," said Jerry Jasinowski, President of the NAM. "More than 60 percent expect their industry to be in recession in the fourth quarter of 2001 through the first quarter of 2002, and another 30 percent anticipate growth to be less than 2 percent in the same period."
More than a fourth of the industry experts participating in the survey projected negative GDP growth in the first half of 2002, and another 60 percent said growth would come in between 0 and 2 percent. They expect things to pick up in the second half of next year, but modestly. A full 86 percent of the CEOs said they expect growth in the second half of 2002 to be less than 2.5 percent, with the majority of them projecting it will be less than 2 percent.
"Forecasts of growth from 2001 to 2002 in capital investment in software, computers and telecommunications equipment are anemic with more than 70 percent predicting it would be between 0 and 5 percent, and more than 20 percent saying it would be negative," Jasinowski said.
"The forecast of capital investment growth for other equipment, such as machine tools and vehicles, was a little stronger, but not by much," Jasinowski said. "A fourth said growth would be negative, about 60 percent said it would be between 0 and 5 percent, and the remainder said it could be upwards of 10 percent or more."
Predictably, projections of earnings growth tracked the generally dim view of near term economic growth and capital investment. About half of the CEOs expect their earnings in the first half of 2002 to grow 3 percent or less, and another 23 percent said earnings growth would be at most 5 percent. Most of them predicted earnings would fare better in the second half of 2002: only 22.4 percent said growth would be 3 percent or less, 38.8 percent said it would be 3.1 to 5 percent, and the remaining 40 percent expect earnings to grow by more than 5 percent.
"This is a business and capital recession," said Donald Wainwright, new Chairman of the NAM, and Chairman and CEO of Wainwright Industries of St. Louis, Missouri. "President Bush recognizes that a strong economy is key to our successful prosecution of the war on terrorism. He proposes to focus on capital formation enabling businesses to grow and create jobs. Yesterday, the NAM Board of Directors passed a resolution supporting a three-part strategy to defeat terrorism, strengthen homeland security and stimulate economic growth.
"The economy is basically in good shape, but is floundering because business leaders and consumers are uncertain about the future," Wainwright said. "The economy needs a jumpstart, and President Bush’s economic stimulus plan is just the ticket. It will get business into gear so it can lead the country out of the recession. This legislation is not about tax breaks for business, it is about capital formation, it is about productive investment, and it is about economic expansion.
"This survey underscores the critical need for an aggressive economic stimulus plan. Time is of the essence. We fully support President Bush in his appeal to Congress to rise above partisanship for stimulus legislation as quickly as possible," Wainwright said.
The NAM believes also that promoting exports must be part of the economic stimulus equation. "Our meeting with the President and Secretary of State Colin Powell underscored the importance of the United States taking a more aggressive position in the global economy," said Harold Wiens, Executive Vice President, Industry Markets, of 3M. "Congress must pass Trade Promotion Authority."
The survey is based on responses from 65 corporate CEOs from all sizes of enterprises who serve on the NAM Board of Directors.
The National Association of Manufacturers – 18 million people who make things in America – is the nation’s largest industrial trade association. The NAM represents 14,000 members (including 10,000 small and mid-sized companies) and 350 member associations serving manufacturers and employees in every industrial sector and all 50 states. Headquartered in Washington, D.C., the NAM has 10 additional offices across the country.
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