Manufacturing, Construction Spending Continue To Decline
August 01, 2001
The latest economic news for trucking and the rest of the American economy is disappointing: Manufacturing and construction spending fell for another consecutive month.
Yesterday the National Association of Purchasing Management reported its purchasing index fell in July to 43.6 from 44.7 percent in June. The reading, which is much lower than analysts were expecting, indicates manufacturing in the United States is contracting. (A number above 50 indicates growth.)
For trucking that means it's been 12 straight months that there have been fewer shipments of raw materials going into factories and less shipments of finished goods leaving factories. The last time the index recorded such an extended period of below-50 readings was 1991-1992.
According to one analyst quoted by Bloomberg, the report shows companies eliminated excess inventory at a faster pace, which "is precisely why you would expect a rebound of production down the road."
Wednesday’s news should not be that surprising. Last Friday the federal government reported the growth rate for the gross domestic product fell to less than 1% annual rate in the second quarter of the year.
Also yesterday, the U.S. Commerce Department reported that construction spending in June fell for the fourth consecutive month, dropping 0.7% from the month before.
Construction spending fell 0.6% in the government sector while private sector spending was down a little more at 0.7%. Spending for schools and other public buildings also fell, while that for highway projects increased by 1.2%.
Construction spending is important to trucking for two reasons. When building levels are higher, the more raw building materials are needed to be moved by truck while at the same time, there is an increased need for trucks to move furnishings that go into the buildings.