In Wake Of Weak Data, ISM's Manufacturing Report Keenly Anticipated

By John S. McClenahen Executives' eyes are already turning away from Jan. 30's unsurprising Commerce Department report showing only 0.7% U.S. economic growth in 2002's final quarter and looking eagerly toward Feb. 3's manufacturing report from the Institute for Supply Management (ISM). They want to see whether the ISM report, covering manufacturing activity in January, shows U.S. manufacturing at least sustaining a surprisingly strong 5.5% index gain in December. In the meantime, there's no getting around the fact that the U.S. economy barely grew from October through December of last year. Indeed, the Commerce Department's initial 0.7% annualized growth-rate figure for the quarter was below the 0.8% or 0.9% that economists generally expected. As a result of a deepening trade deficit and inventory corrections, manufacturing production fell at an annual rate of 2.2% during the quarter, notes Daniel J. Meckstroth, chief economist at Manufacturers Alliance/MAPI, Arlington, Va. "Manufacturing is still the weak spot in the economy," he says. Recent U.S. Labor Department data on unemployment claims don't show a consistent pattern of companies being back to hiring, relates Maury Harris, chief U.S. economist at UBS Warburg, New York. Indeed, last week, initial claims for unemployment insurance were 397,000, an increase of 14,000 from the previous week's revised figure of 383,000. But the four-week moving average of initial claims fell by 3,000 to 384,000. And that, along with a slow slide in total beneficiaries and a dip in the insured jobless rate, is encouraging to Harris, who is forecasting GDP growth at an annual rate of 2.5% in the current calendar quarter.

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