Taking stock of the economy

By John J. Keough -- Industrial Distribution, 2/1/2001

Soft landing or hard landing? That's the question many economists are trying to answer as they attempt to gauge what's happening to the nation's economy. For the past several years, we've achieved an unprecedented growth in a number of sectors, including manufacturing. Until recently the stock market had been on one of the lengthiest bull runs in history.

Everyone, it seemed, was basking in the good economic news. It didn't matter what type of products you were manufacturing or distributing. A major era of expansion was underway. The Federal Reserve raised interest rates six times between the fall of 1999 and last May in order to slow down the nation's economy and keep it from overheating.

In the last few months, the news hasn't been good. General Motors and many of the other major automotive manufacturers, as well as small machine shops, have announced major layoffs. GM says it will lay off 10,000 workers this year.

The nation's manufacturing sector slumped in December to its lowest point since the early 1990s, indicating the economy was in a major slowdown, which could possibly lead to recession. And the National Assn. of Purchasing Management said that U.S. manufacturers saw orders and output drop in December for the fifth consecutive month as major industries slashed production.

The economy is definitely slowing and some economists are worried about inflation. An index of prices paid by manufacturers climbed in December compared to November.

The Fed has reacted even faster than many have expected as it dropped interest rates by one half percent. Many experts believe further cuts are forthcoming. While this is good news in particular for smaller companies, corporate profits are under pressure.

This is the time for many distributors and manufacturers to examine their internal operations and the markets they service.

The R.M. Wright Co., a fluid power distributor in Farmington Hills, Mich., our cover story this month, (p.44) shows what happens when a company thinks outside the box and expands its traditional offerings. This distributor's main focus is on the automotive sector, but the company is seizing new opportunities and attracting new customers. You should look for similar new opportunities to grow your business.