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April 18: U.S. firms urge Greenspan to throw them a lifeline Weathering 'perfect storm': Manufacturers call for further interest-rate cuts and a lower dollar.
nationalpost.com
Recession weary U.S. manufacturers have put out an urgent call to Alan Greenspan, the chairman of the U.S. Federal Reserve chairman, for more interest-rate cuts in a bid to weaken the U.S. dollar and boost exports.
In the wake of weakening consumer confidence and spending, battered manufacturers said yesterday they need more help especially if the few signs of recovery prove to be weaker than expected.
"The Federal Reserve should reduce the federal funds interest rate from 5% to 4.5% and should be prepared to reduce the rate to 4% if conditions remain poor," said Jerry Jasinowski, president of the U.S. National Association of Manufacturers. He said a key fed fund benchmark rate of 4% would boost consumer spending by about US$70-billion and raise investment by about US$26-billion. That would add nearly 1% to the U.S. growth rate, leading to fourth-quarter growth of about 3.9%.
The Fed next meets to consider rates on May 15 and is expected to trim half a percentage point from its fed fund rate. It has cut interest rates by 1.5 percentage points since early January.
The association's plea for lower rates came as Cisco Systems Inc. -- a bellwether of manufacturing and high-technology -- said it planned to cut 8,500 jobs, or about 17% of its work force, because of a dramatically cooler U.S. economy.
The 106-year-old manufacturing association, which represents much of U.S. industry, said it suffered through a "perfect economic storm" late last year because of high interest rates, soaring energy costs, an overvalued U.S. dollar, huge inventories and a precipitous drop in share values.
"Manufacturing bore the brunt of the slowdown, as the loss of about 400,000 manufacturing jobs since last summer bears witness," Mr. Jasinowksi said, adding that corporate profits fell 20% to US$55-billion in the fourth quarter of last year.
Although there are some signs manufacturers have at least worked off some of their unsold inventories, the association is worried about the prospect of rolling electricity black-outs this summer, deteriorating consumer sentiment -- which fuels about two thirds of the U.S. economy -- and a U.S. dollar priced too high against the euro and the Japanese yen to make the U.S. a competitive exporter.
U.S. firms urge Greenspan to throw them a lifeline Weathering 'perfect storm': Manufacturers call for further interest-rate cuts and a lower dollar.
Peter Morton
Financial Post |
