Latest US Economic Data is Contradictory

06 February 2002

A question-mark still hangs over the health of the US economy after publication of the latest crop of [seasonally adjusted] indicators.

Reminiscent of a clutch of medieval barber-surgeons poring over the entrails of a sheep, economists and analysts are having difficulty in establishing a clear picture of the nation’s economic future – both in the short and medium term.

On the plus side, the US Department of Commerce reported a December increase of 1.2% in factory orders to $322.2 billion, following a 4.3% decline in November.

Conversely, however, the Non-Manufacturing Activity Index published by the Institute of Supply Management fell to 49.6 in January from 50.1 the previous month.

According to the ISM (formerly the Institute of Purchasing Management) the index had been “see-sawing over the expansion/contraction mark [of 50] for the past three months . . . indicating a continuing struggle for growth in non-manufacturing activity”.

However, it is the manufacturing sector that invariably leads the economy into and out of recession. Factory orders throughout 2001 were down 8.5% on 2000 – the sharpest drop since 1992 when comparable data was first compiled.

But orders for all durable goods rose 1.7% in December to $175.9bn, following a 6.1% decline in November. Defence-related orders for transport equipment, increased 3.6% to $49.8bn, underscoring the rise in durable goods orders. In the computers and electronics sector, orders were up 3.1 in December to $33.2bn on the back of a 12.7 per cent increase in chip orders.

The entrail-rakers sat on the fence. “This is a classic example of mixed signals at the bottom [of the economic cycle] . . . there's something here for everyone,” sagely equivocated Stephen Roach, chief US economist at Morgan Stanley.

News source: Financial Times