U.S. economy up a bit Md. factory outlook brightens

November 05, 1992|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- The U.S. economy has lurched through six more weeks of uneven economic growth, but signs point to a possible upturn in Maryland's manufacturing industries, according to a survey released yesterday by the Federal Reserve.

While describing the same stagnant national conditions that helped Gov. Bill Clinton to victory on Tuesday, the Fed said that businesses in Maryland were growing more optimistic for manufacturing's prospects.

Exports were unchanged and order backlogs were flat, but expectations increased that things would be better in Maryland.

"Optimism was strong about the next six months," the survey, which examined the U.S. economy from mid-September to late October, said in a special section on Maryland manufacturing. "No respondent expected business activity to decrease nationally or regionally."

The possible upturn in manufacturing was mirrored in another government report released yesterday that showed that factory orders rose by 1.1 percent in September, the largest gain since June.

But the report also revised August's figures to show a 2.2 percent drop in factory orders, worse than the preliminary 1.9 percent drop reported earlier.

Economists said this showed that factory orders remained volatile and that no trend can be drawn from yesterday's upswing, except that the economy was growing in fits and starts.

Despite the guarded optimism for Maryland's manufacturing, the general message of the Fed's report, known as the "beige book," was that the national economy would continue slogging forward.

"Economic activity has continued to increase, but at a slow and uneven pace," according to the report, a survey of national and regional economic conditions that helps the Fed determine the nation's monetary policy.

It is issued about every six weeks for the Federal Reserve Board's Open Market Committee.

The conclusion for the Fed's Fifth District, which is based in Richmond and includes Maryland, was a bit more upbeat: "Conditions were uneven, but, on balance, improved between mid-September and late October."

Most sectors of the region's economy edged upward, except tourism, commercial real estate and the district's ports.

Employment was steady, and wages increased.

Businesses that were surveyed were generally optimistic about the next six months, expecting increases in all indicators except employment, which they believe will stay the same.

Michael Conte, who heads the University of Baltimore's Jacob France Center for Business and Economics, said the survey might have overstated Maryland's prospects.

The region that includes Maryland also includes the District of Columbia and Virginia, two relatively strong economic performers, Mr. Conte said.

"While I'm sure that this overall benign view is correct for the region, the situation in Maryland lags somewhat," Mr. Conte said.

He noted that while the survey shows tax revenue to be on target, Maryland's revenues have lagged.

And the real estate market, which the survey showed as stable, could be skewed by strong foreign investment in the District of Columbia.

A recent survey of Baltimore-area chief financial officers by the University of Baltimore also cast doubt on the Fed's relatively upbeat appraisal of Maryland's manufacturing prospects.

The survey showed that while contraction has probably ended, no great expansion is in sight.

This generally sober appraisal of the economy was shared by Paul Boltz, chief economist for Baltimore's T. Rowe Price Associates Inc.

Mr. Boltz said that Maryland has been hit hard by defense cuts, which probably would be accelerated by the incoming Clinton administration.

"The economy hasn't gained here," Mr. Boltz said. "Frankly, we don't think it will gain that momentum in the near future."

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