To: Robert Douglas who wrote (2631 ) 12/20/2000 5:34:48 PM From: Henry Volquardsen Read Replies (2) | Respond to agreed. the economy is weakening. and much more rapidly than many expected. Steel production fell sharply last week to new 2-year lows and near the lowest levels since the last recession, suggesting decisive weakening in the manufacturing sector and sharpening weakness in the overall economy.Last week, steel production fell a whopping 7.6% to 1.759 million short tons from 1.903 million the previous week. That's well below the peak of 2.379 million tons sent in April and the lowest since November 1998. Capacity utilization now stands at just 70.3%, the lowest since July 1991, just 4 months after the end of the last recession. Capacity utilization is now significantly below the peak of 95.9% set in the week ended April 3rd. The soft steel data coincides with the recent build in inventories, a factor that has weakened manufacturing orders. Auto inventories have risen as sales have slowed from the extraordinary pace seen earlier in the year. Indeed, auto manufacturers have announced numerous plant closings in response to bloated inventories and this has prompted layoffs that have recently pushed weekly jobless claims close to a 2-year high. Moreover, a month ago, U.S. Steel announced that they will pare production and that the shutdown might result in "substantial layoffs." The recent weakness in steel production has coincided with the the biggest 2-month drop in manufacturing employment since the last recession in August and September, and four straight months wherein the NAPM index has been below the critical 50 mark, indicating a contraction in the manufacturing sector. The continued weakness in steel production is a clear sign that the economy continues to head downward with no end in sight. Since Greenspan is known to be a close follower of steel production figures, this new data should heighten Greenspan's concern about a slowing U.S. economy.
