ann.
glad you liked the report -- while perhaps not as intriguing (ha!), here's an economic article via ibd. fair warning: it's rather lengthy, so i've italicized the safeskin-relevant parts from cfo david morash...if you just want to hit the 'good' parts.
The Economy America's Best Not Sniffling From 'Asian Flu'
Investors Business Daily, Monday, February 23, 1998 at 13:42
New Poll Of Top Execs Shows They See Healthy Economy Through 2000
Despite recent market turmoil and financial crisis in Asia, a growing number of business leaders think the economy's expansion can last through the turn of the century - and beyond, an exclusive IBD/TIPP poll shows.
That would make this the longest economic expansion since World War II.
Many executives worry about the potential impact of Asia's economic crisis on the American economy. But even more are relieved that the crisis seems to have kept Alan Greenspan & Co. on hold.
Their optimism over America's economy extends to their own businesses as well. Over two-thirds said they planned to increase hiring during the next six months. And profits will keep on trucking, say 88% of respondents.
Investor's Business Daily and Technometrica Institute of Policy and Politics asked 210 CEOs and CFOs of leading companies to take part, and 101 responded to the current poll. The business leaders included represent America's top companies, based on earnings growth - not size. This poll follows up on another IBD/TIPP poll on the economy done last July.
"I think the economy is going to continue to move forward, maybe at a slower pace, but basically healthy," said David Morash, chief financial officer at Safeskin Corp., a maker of latex gloves in San Diego. "The U.S. continues to amaze the rest of the world with its ability to keep growing."
What's behind the optimism? "The combination of low inflation and
productivity (gains) are key factors in our economic growth," said
Bruce Downey, chief executive officer at Pomona, N.Y.-based Barr
Laboratories, which manufactures generic drugs.
Four in five respondents pointed to low inflation as a driver of growth. Consumer prices were up just 2.3% last year, down from a 3% gain the year before. And wholesale prices actually fell 1.2% last year.
The outlook for continued low inflation has kept the Federal Reserve on hold for nearly a year. The Fed last raised the federal funds rate, its main policy tool, a quarter point to 5.5% last March.
Ongoing declines in commodity prices and cheap imports from Asia will
keep the Fed on hold, most think.
"We think that interest rates are coming down, not going up," Morash said. "The deflation of commodity prices, and the impact of imports, is going to bring down the cost of goods sold in the U.S. Because of the strong dollar, it's hard for the Fed to raise rates."
The share of respondents fearing Fed policy could trigger an
economic decline fell sharply. But 59% still think that Fed policies
could cause a downturn.
And the number fearing deflation more than doubled to 14%, suggesting that some respondents think Fed policy is too tight.
"Deflation is probably a bigger threat than inflation," said Fred
Butler, CEO at The Manitowoc Company, a maker of construction
equipment in Manitowoc, Wis.
Reflecting the fallout from Asia's economic crisis, just 7% said
economic growth abroad is now a significant factor sustaining growth.
In last July's poll, a fifth of respondents believed it was helping to boost growth. The new poll also shows that a fifth of respondents think global competition could trigger a downturn, up from 8% in the last poll.
"I'm not particularly optimistic about the impact of the Asian
devaluations, so I think U.S. manufacturers are in for a tough time
for the next few years," Morash said. He doesn't expect a downturn,
but thinks that the current rate of growth won't hold up.
Most other business leaders polled share that view. Nearly half said Asia's economic troubles pose some threat to America's economy. The biggest impact will be on exports, respondents said. Corporate earnings and profits are also expected to suffer.
Already, Asia's economic troubles are showing up in the U.S. trade
deficit, which hit $10.8 billion last year, the highest in nine years. The trade deficit with Asia's "newly industrialized countries" - which include Thailand, Indonesia and South Korea, among others - swelled to $7.9 billion in December, up about 60% from last July.
Four in five respondents, though, said lawmakers should not raise
trade barriers in response to a sharp rise in the trade gap. Just 12% said barriers should be raised.
Partly, that's because many executives are about to see their costs fall due to cheaper inputs. About 80% expect a flood of cheap imports.
Thanks in part to Safeskin's factories in Malaysia and Thailand,
Morash said, "Our ability to compete in the U.S. market has increased
dramatically."
Barr Labs' Downey also reports seeing the cost of imported parts
falling, although he reports that's true for his competitors as well.
"At the end of the day, (cheap imports) mean more disposable income for individuals," Butler said. Butler argues that high disposable income among baby boomers is the real driver of today's economy. To him, that means the current expansion will probably hold up for another seven years.
"After that we could go into some really tough times," he said,
because a much smaller share of the population will be in their big-
spending years.
Last quarter's 10% stock-market sell-off has raised jitters about the effects a market drop could have on the economy. Almost half of
respondents said a declining stock market could trigger a downturn.
That's up from just 36% who said so last July, when the market was on
its meteoric rise.
Poll respondents were relieved to see the federal budget deficit
shrinking, with 29% saying the level of the deficit is a factor
sustaining growth, up from 21% in the last poll.
Higher taxes topped business leaders' list of threats to the
expansion. Two-thirds thought higher taxes could trigger a downturn,
but the decline in the budget deficit seems to have eased fears that
taxes might be on their way up.
"A tax increase would have a negative impact on the economy," Downey said. "But given the current budget situation at the federal and state level, it's not looking very likely."
At the same time, though, Morash fears taxes will eventually rise
if the economy slows - and government spending continues its upward
climb.
Business leaders gave government policies little credit for the
good times. Just 6% believed Clinton administration policies were a
key factor sustaining growth. That's down from 10% last July. And
13% credited Congress' policies for sustaining growth, up from 9% in
the last poll.
Government regulation figured high on executives' list of possible
threats to the economy.
"Our regulatory environment makes it very difficult to be cost-
competitive abroad," said Downey. That situation could get worse if
Vice President Gore became President, Morash said.
Another major shift highlighted by the latest poll was growing
confidence in hard-won productivity gains. As a factor contributing
to the expansion, it ranked third. And far fewer respondents said
they were worried that declining or stagnating productivity would
trigger a downturn.
In February's poll, just a third said they thought a productivity
slowdown could trigger a downturn. That compares with 56% who
thought it would last July.
Last year, productivity picked up 1.7%, down from a 1.9% gain the
year before.
Although a real uptick in productivity growth hasn't shown up in
government data, few business leaders doubt it has been there all
along.
"Why it didn't show up in the numbers is mystifying. We've upped our productivity tremendously over the past three years," Butler said.
Added Morash, "Productivity gains are based upon actions taken
over the last 10 years, so I would think they have a fairly strong
likelihood of continuing."
Just 2% of respondents expect to slow their investments in new
technology, while 88% say they will pick up. And 47% point to
information technology as a driver of economic growth. |
