Hard Landing For Manufacturing?

By John S. McClenahen In the wake of today's U.S. Commerce Dept. downward revision of third-quarter GDP to 2.4% from 2.7%, the critical question is whether the soft landing the U.S economy is headed for will be harder on manufacturing than other sectors of activity. Lower-than-previously-reported numbers for spending on equipment and software, high-tech goods, and transportation equipment figured in the government's third-quarter revisions. Meanwhile, "high interest rates have caused a sharp slowdown in construction, and, as a result, production will be weaker in industries like construction materials and home furnishings," notes Jerry J. Jasinowski, president of the National Assn. of Manufacturers, Washington. And inventories built up in this year's second calendar quarter are still being worked down, he adds. Inventories "will continue to be a drag" on the overall economy this quarter and probably during the first three months of 2001, believes Bruce Steinberg, chief economist at Merrill Lynch & Co., New York. But he discounts a hard landing for the overall economy, claiming that it has already achieved "a soft landing, which we define as GDP growth in the 3%-to-4% range."