ByJohn S. McClenahen For manufacturing executives tired of the U.S.'s reluctant recovery from recession, there definitely are some statistics to like among the economic data that the U.S. government released June 17. Take, for example, May's 0.1% increase in U.S. industrial production and the 0.2% rise in manufacturing output. Though the numbers are small, the implications for 2003's second six months are big, contends Daniel J. Meckstroth, chief economist at the Manufacturers Alliance/MAPI, an Arlington, Va.-based business and public-policy group. "Industrial activity seems to be stabilizing from the double-dip recession that has plagued the manufacturing sector for the previous nine months," he says. "The May numbers offer a glimmer of hope that the declining dollar, low interest rates, [a] federal tax cut, lower oil prices, easier business credit terms and rising business profitability [have] started to stem the slide in goods production." Starts for single-family homes in May were at an annual rate of 1.378 million, "slightly above last year's 1.365 million average," says Maury Harris, chief U.S. economist at UBS Warburg, New York. "Low mortgage rates are fueling hefty mortgage applications, suggesting that demand for new homes could strengthen in June." However, Tuesday's consumer price numbers from the U.S. Labor Department and capacity utilization figures from the Federal Reserve did not eliminate deflation as a continuing economic concern. Although the core CPI -- which excludes price changes for food and energy -- rose 0.3% in May, it's averaged just 0.1% during the past three months, notes UBS' Harris. Meanwhile, U.S. industry was operating at just 74.3% capacity. "The Fed will likely want to battle this mild downward pressure by easing [short-term interest rates] this month," says Harris.
