Though many markets and financial indicators have roared back and ebbed recently, U.S. Commerce Department data tracking 1998 shipments and new orders for the aggregated 'Measuring and Controlling Instruments' (SIC 382) industry group demonstrates the serious impact global economic problems had on measuring and control device manufacturers.

Preliminary numbers for 3Q98 show the dollar-value of shipments from SIC 382 firms was 8.3% below the level recorded during the same period in 1997. Compared to 1Q98, the dollar value of July-September shipments fell by 5.2%. Total orders for 3Q98 came in marginally better-down just 5.5% from 3Q97's total-so there's some reason to believe we've reached the bottom of this down cycle.

Economic problems in Asia, Latin America, Russia, and other emerging nations must take most of the blame for the industry's 1998 downturn. It's almost certain 1998's total dollar value of shipments will fall below 1997's level of $50.2 billion. This is the first time since 1989 that new orders failed to grow over the year before, and the first time since 1986 that a year's total shipments declined.

Similarly, a 'Report on Business' by the National Association of Purchasing Management (NAPM) for October 1998 showed economic activity in the nation's manufacturing sector contracting for the fifth month in a row and at a faster rate than before. The Purchasing Managers' Index (PMI) was last above 50, which represents an expanding manufacturing sector, in May 1998. However, by October PMI slipped to 48.3.

While it's likely that Fed interest rate cuts and improving international economic conditions will help the PMI to recover some lost ground in early 1999, the general trend is consistent with the consensus expectation that the U.S. economy will grow more slowly in 1999 than it has during the past three years. Meanwhile, only six of the 20 major manufacturing industry sectors surveyed reported their business environments improved between September and October 1998.

In short, NAPM's report indicates the U.S. economy is continuing to grow, but points to a moribund manufacturing sector. NAPM's analysts, who look at the historical relationship between PMI movements and trends in overall economic growth, say if October 1998's PMI of 48.3 continues into next year, it would translate into a real GDP growth of just 1.6%.