With any luck, 2004 will break that streak -- even if just barely. Moore predicts sales will increase at least 1%. Prices, more or less flat for the past two years, could creep up 5%. Yet even that may be wishful thinking. Despite dozens of plant shutdowns, his industry still has excess capacity. And the economic expansion hasn't stimulated much new demand. As a result, papermakers plan to close more mills and dismiss thousands more workers.
Similar dirges are common among other manufacturers of basic materials. The notable exceptions are steel and mining of nickel, copper, and other metals. The tariffs on steel imports that were recently lifted to avoid reprisals from Europe apparently did their job over the past couple years. Steel producers got their shops in order and late last year hiked prices by 20% -- their second major boost since mid-2003. Still they keep taking orders. Nucor Corp. (NUE
), for one, is booked solid into February.
As business investment rises and consumers keep on spending, others industries will rebound, too. Demand for industrial commodities is growing outside the U.S. as well, especially in China. And the flagging dollar has got more foreigners buying American. As a result, forecasters at Economy.com say heavy industry's output should grow 4% in 2004, to more than $968 billion, while capacity utilization inches up 3.6 percentage points, to 76.35%.
All well and good, until you compare conditions with the late 1990s. U.S. output of most industrial goods has fallen so far since then that it could take years of 4% gains to soak up the surplus capacity. But there's slim chance of that happening. The outflow of manufacturing to low-cost countries continues unabated, putting pressure on stay-at-home outfits to pack up and move, too -- or shut down. And with foreign competition keeping a lid on prices, U.S. factory profits are being squeezed dry by higher energy costs.The Long Farewell
The same goes for manufacturing employment. While overall hiring began edging up in 2003, the sector had lost jobs every month for more than three years running -- a cumulative loss of 2.8 million jobs since mid-2000. That's roughly 17% of manufacturing's total workforce at the start of the downturn. David M. Huether, chief economist at the National Association of Manufacturers, reckons half those factory jobs are gone forever. Indeed, some outfits, such as 3M (MMM
), are still cutting. "Everyone is getting all excited about the economy," says 3M CEO W. James McNerney Jr. "I'm stopping a little short of being euphoric."
Even two years of rising gross domestic product have brought only marginal improvements, so far, to basic manufacturing. That 4% uptick predicted by Economy.com will help brighten the outlook for this year. But the good times look like they're a thing of the past. By Michael Arndt in St. Louis