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Manufacturing Reports Deliver Glum News

By John S. McClenahen Consider it a reminder that the US. economy is still very much in an uneven recovery from the most recent recession. Following recent reports from the Institute for Supply Management and the Manufacturers Alliance/MAPI suggesting a real manufacturing recovery might finally be starting in the U.S., the Federal Reserve Board reported on Jan. 17 that U.S. manufacturing output declined 0.2% in December. Manufacturing output had advanced 0.1% in November. "A sharp drop in the production of motor vehicles and parts, which more than reversed [their] November gain, contributed to the overall decline," the Fed said. Capacity utilization in U.S. manufacturing also fell in December 2002, down to 73.6% from 73.8% in November. Overall industrial capacity utilization -- which includes mining and utilities as well as manufacturing -- fell to 75.4% in December from 75.6% in November. That's a percentage point above its most recent low in 2001 but still far below the 30-year average of 81.5%, notes Maury Harris, chief U.S. economist at UBS Warburg LLC, New York. "Incentives to resume capital spending thus remain muted," he states.

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