U.S. Manufacturing Takes A Hit The manufacturing sector of the U.S. economy hit a new all time low on Friday. The Institute for Supply Management, a trade group for purchasing executives, reports that manufacturing activity in all industry sectors is at the lowest level in 28 years — another measure of the current recession.
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U.S. Manufacturing Takes A Hit

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U.S. Manufacturing Takes A Hit

U.S. Manufacturing Takes A Hit

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LIANE HANSEN, host:

The manufacturing sector of the U.S. economy has hit its lowest level in 28 years. The Institute for Supply Management, a trade group for purchasing executives, reported Friday that manufacturing activity in all industry sectors plummeted - another sign of the current recession. Joining us by phone is Nigel Gault. He's the chief U.S. economist for IHS Global Insight, an economic research and forecasting firm. Thanks for joining us.

Mr. NIGEL GAULT (Chief U.S. Economist, IHS Global Insight): Thank you.

HANSEN: Is it any surprise to you that manufacturing is in such a bad slump?

Mr. GAULT: Unfortunately, not based on what we've been seeing over the past few months. Manufacturing in the U.S. had been heading down for some time now, but not catastrophically. Unfortunately, over the last few months, this recession has broadened out to cover all sectors in the U.S. economy and also the global economy, and that's now taking down exports on which manufacturing had previously been relying to prop things up.

HANSEN: So everything is going down globally. It's not just the United States having an effect on that, or is it everyone is having problems?

Mr. GAULT: The biggest problem is the origin of the problem. Yes, we can say that's in the United States. But it's much, much broader than that now. It's really very, very hard to find anywhere in the world that you can say is not taking part in what looks like the worst global recession in the post-war era.

HANSEN: How big a role is manufacturing actually playing in this recession?

Mr. GAULT: The manufacturing sector, by its nature, is very cyclical. It produces a lot of durable goods, which means things that you can easily postpone the purchase off, for example, an automobile or a firm considering a purchase of capital equipment. You can decide, I'm going to do this year. I'm going to wait a bit until things improve. So, as always in recessions, manufacturing is more cyclical. It tends to take more pain than the other parts of the economy.

HANSEN: Now, what effect will this have on people who maybe don't have anything to do with the manufacturing sector? They don't work there. How is this going to affect the ordinary citizen?

Mr. GAULT: Well, if manufacturing is going down, then it means that the people who work in manufacturing maybe they lose their jobs or maybe they're working less overtime or maybe they're forced to work part-time instead of full-time. They have less income. And if they have less income, then they spend less so that any businesses - maybe in the service sector, who rely on the spending from people employed in manufacturing, they will see the demand for their products go down as well.

HANSEN: What are the industries that have been hardest hit? I mean, we know about the auto industry in the United States, but what are some of the others?

Mr. GAULT: Well, in the early stages, it was industries that were, you know, very closely related to housing. And what we're starting to see now is industries that may have been helped, up until recently, by export demand, that might be machinery, heavy equipment, particularly construction machinery, they are now seeing demand evaporating, as well.

HANSEN: Does it strike you as manufacturing is kind of another domino falling in a long line?

Mr. GAULT: I think so. Yes, absolutely. And you sort of wonder what other dominoes are there to go. I think the next domino to go, in quite a big way, is probably going to be non-residential construction - building of offices, building of retail malls, et cetera, which, up until recently, that's held up pretty well. But all the signs are that that is going to go down very heavily over the next year or so.

HANSEN: Nigel Gault is the chief economist for IHS Global Insight. He joined us by phone from his home in Bedford, Massachusetts. Thank you so much.

Mr. GAULT: Thank you. ..COST: $00.00

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