U.S. Economic expansion: longest in nation's history
By Daryl Delano -- Modern Materials Handling, 3/1/2000
Economic growth seems sure to slow from the pace of the late '90s this year - the Fed will insist upon it, with sharply higher interest rates, if need be. However, there's still nothing on the horizon to indicate that this long period of economic expansion - 9 years old this spring, and the longest period of non-recessionary economic activity in the nation's history-will come to an end anytime soon.At 4.0%, full-year gross domestic product (GDP) growth during 1999 was marginally lower than it was over the previous 2 years. And preliminary data for the final 3 months of 1999 show it to be the strongest quarter of the year. Total gross domestic product is estimated to have increased at an extraordinary 5.8% annualized rate after adjustment for inflation. Consumer spending growth accelerated, as did federal government spending. Durable goods purchases (cars, computers, consumer electronics, and the like) grew at a nearly 12% annual rate during the final 3 months of 1999.
Most worrisome about the fourth-quarter 1999 GDP report was the indication that inflation was starting to pick up from the low levels that have prevailed over the past 4 years. The price index for gross domestic purchases (which measures prices paid for the whole range of consumer and business goods) increased at a 2.3% rate during the final quarter of last year, compared with a 1.7% increase during the July-to-September period. This represented the highest rate of inflation recorded by this most-comprehensive measure of materials and wage price change since the second quarter of 1996.
And the first two reports available (both from non-government sources) on economic activity for the first month of the new year/century/millennium suggest that the economy's momentum has-if anything-picked up in these early days of 2000.
The business sector of the nation's economy seems to be responding in kind to this heady optimism. The National Association of Purchasing Management's (NAPM) "Report On Business" shows that economic activity in the nation's manufacturing sector grew for the twelfth consecutive month during January, and growth in the overall U.S. economy recorded its 105th consecutive month of gain.
The NAPM's Purchasing Managers' Index (PMI) was at a level of 56.3 in January 2000, 0.5% lower than in December 1998 but 6.4% higher than at the start of last year. A PMI reading above 50 indicates that the manufacturing sector of the economy is expanding, while anything below 50 signals a contraction.
Growth in the production component of the (PMI) decreased about three points between December and January, but growth in the orders component accelerated during the first month of the year. The production index was above 50 for the thirteenth straight month this January. The new domestic orders index rose about a point over the latest month to the very healthy level of 60.4 during January. Twelve of the 20 manufacturing industries surveyed reported rising orders over the month.
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