20% of manufacturers expect to cut spending this year

About 56% set to raise it at least 5%, survey finds

February 13, 2003|By BLOOMBERG NEWS

WASHINGTON - One in five U.S. manufacturers expect to reduce spending on equipment and software this year, according to a survey released yesterday by the National Association of Manufacturers.

The survey of the trade group's 79 boards of directors also showed that about 56 percent said they would boost their spending on new equipment by as much as 5 percent by year's end. One in eight say they will either eliminate jobs or keep payrolls the same through June, as factories reduce costs to shore up profits.

Business investment in new plants and equipment rose during the fourth quarter for the first time in more than two years. Increases in company spending on new computers, machines and other equipment are needed to help the economy grow at a faster pace, economists said.

"Capital investment is key to a strong rebound" and "our directors expect only modest improvement in 2003," said Jerry Jasinowski, the association's president. That explains why manufacturers "expect weak economic growth early in 2003, picking up modestly as the year wears on."

The survey showed three-quarters of the manufacturers surveyed expect the economy to expand by up to 2 percent through the end of June. About 60 percent say the economy will grow 2.1 percent or more in the second half.

Recent reports suggest manufacturers started the year on solid footing. The Institute for Supply Management's factory index registered a reading of 53.9 in January, the third straight month exceeding 50, regarded as an indication of expansion.

The survey also showed that 72.2 percent of manufacturers expect the economy to "rebound quickly once hostilities" with Iraq subside. The conflict "will not tip us into recession," Jasinowski said.

While 17 percent say they plan to hire more workers in the first half of the year, twice as many expect to do so from July through December. Manufacturers have eliminated jobs every month since August 2000.

The National Association of Manufacturers represents 14,000 members and 350 member associations serving manufacturers and employees.

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