Instruments may lose steam despite GDP growth in 1Q98

Is it time to cool off? Though the nation's GDP grew 4.2% during 1Q98, the U.S. Commerce Department says the manufacturing sector is showing some signs of slower growth. This suggests overall GDP gains will likely moderate during the rest of 1998.Manufacturing sector production expanded by 1.8% during 1Q98—down sharply from its 8.

By Daryl Delano July 1, 1998

Is it time to cool off? Though the nation’s GDP grew 4.2% during 1Q98, the U.S. Commerce Department says the manufacturing sector is showing some signs of slower growth. This suggests overall GDP gains will likely moderate during the rest of 1998.

Manufacturing sector production expanded by 1.8% during 1Q98—down sharply from its 8.1% gain during 4Q97 and well below its 6.3% gain over 4Q96. Technology-intensive industries generally gained the most during 1Q98. The computer manufacturing sector increased output by 38.2% during 1Q98, outpacing 4Q97. The electronics equipment industry grew by 13.3% in 1Q98, which was a moderately lower growth rate than the 18.5% gained during 1997.

In addition, though the GDP report showed investment in new buildings declined for the second consecutive quarter, spending for new equipment surged to a 28.8% annualized gain during 1Q98.

The Commerce Department also found that growth in new orders for the aggregated ‘Measuring and Controlling Instruments’ (SIC 382) industry group slowed markedly during 1Q98. Preliminary data show new orders for SIC 382 firms rose by only 2.9% over 1Q97.

When compared to 4Q97, the dollar value of 1Q98 orders fell by 6.2%. This was the first over-the-quarter decline since the fall of 1996. Orders for March 1998, totaling just over $3.74 billion, came in less than a half-percent above the year-earlier total.

SIC 382 shipment trends were only slightly more positive than orders trends during 1Q98. First-quarter shipments were 5.2% ahead of shipments during 1Q97, but the dollar value of measuring and controlling instruments shipped was actually 2.1% lower than for 4Q97. Likewise, the dollar value of March 1998 shipments bested the March 1997 total by a slight 2.0%—the smallest monthly over-the-year gain for the industry in the past 14 months.

Author Information
Daryl Delano, Cahners Economics, ddelano@cahners.com