The latest business statistics paint a picture of moderate growth in economic activity

Modern Machine Shop, August, 2002

The latest business statistics paint a picture of moderate growth in economic activity. The strong 5 percent-plus growth in real Gross Domestic Product of the first quarter was largely the result of a swing in business inventories. A sharp reduction in stocks took place as the recession took hold, followed by a rebuilding as orders and production picked up as the downturn came to an end. The consumer chipped in by increasing spending, particularly for new cars as manufacturers offered enticing incentives.

The second quarter showed a much slower pace of business activity. The inventory cycle essentially had run its course. But, buoyed by new orders, manufacturing activity has been expanding for several months now. However, most factories remain reluctant to hire workers until they are sure the economic recovery is for real. This isn't atypical in the early stages of a recovery, when companies generally prefer to offer overtime rather than commit to new hires. And with inventories at relatively low levels, most manufacturers remain reluctant to increase output without sustained demand.