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March 19, 2001 01:00 AM

NAM predicts bleak manufacturing outlook

Bill Bregar
Senior Staff Reporter
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    CHICAGO — With 84 percent of factory executives saying their markets are in a recession or will grow only slowly this year, the National Association of Manufacturers is calling for lower taxes and more interest-rate cuts.

    NAM, which represents 14,000 manufacturing companies, announced results of its national survey at a March 5 news conference to kick off the National Design Engineering Show & Conference.

    On the show floor at Chicago's McCormick Place, suppliers displayed gee-whiz factory automation products. But NAM President and Chief Executive Officer Jerry Jasinowski was glum.

    "There's no reason to be particularly optimistic about the current economic environment," he said

    NAM is pushing for President George W. Bush's tax cuts. The trade association also wants the Federal Reserve Board to keep cutting interest rates.

    "Clearly, we need quick action on both the monetary and fiscal policy fronts to restore business and consumer confidence and avoid a recession," Jasinowski said.

    Capital spending helped fuel the longest-ever U.S. economic expansion and boosted U.S. productivity an average of 5 percent for the past five years, NAM said. But after bingeing, NAM members now are closing their pocketbooks, according to the NAM survey of 327 companies.

    Faced with a weak economy, manufacturers plan to rein in capital spending on computers and machinery this year. NAM said 57 percent of respondents said their 2001 spending for machinery, vehicles and other equipment will rise by not more than 2 percent, compared with the amount invested last year.

    For computer-related goods, 76 percent said spending will increase this year by 5 percent or less.

    Slowing demand has left many companies with excess inventory — lots of it, NAM said.

    "We've been working that off, much too painfully slow," he said.

    Asked to evaluate the growth in their sectors for the first and second quarters of 2001, 44 percent of manufacturers called it a recession, while 40 percent think their businesses will experience slow growth of less than 2 percent.

    Manufacturing executives listed belt-tightening and new product development as the two most popular strategies to cope with the economic slowdown. Some 72 percent plan to "aggressively cut costs at each stage of the supply chain."

    Rolling out new products was listed by 58 percent of respondents.

    Right now, e-commerce is not at the top of most executives' agendas. NAM reported that 63 percent of respondents do not sell anything via the Internet, and 73 percent said increasing e-commerce activity is not one of their top three business priorities this year.

    "Manufacturers are not as e-savvy as they should be," Jasinowski said.

    NAM sponsors National Manufacturing Week, which included the Design Engineering Show and three other factory shows, all held at the same time at McCormick Place.

    NAM member companies employ 18 million.

    Big layoffs in late 2000 helped topple consumer confidence. But Jasinowski said factory employment should stabilize.

    "I think we've seen the worst of the layoffs in manufacturing," Jasinowski said, though he predicts more layoffs in the service sector, which has beefed up employment in recent years.

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