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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: lurqer who wrote (32479)	3/6/2001 1:01:05 PM
From: Dalin	Respond to of 65232

A whole week of up? My gosh....has that ever happened? <g> Seems a long time ago, doesn't it? :0) Ramblin

To: lurqer who wrote (32479)	3/6/2001 3:29:49 PM
From: Sully-	Read Replies (2) \| Respond to of 65232

Not sure about this rally. Hope we see it continue, but something doesn't feel right about it..... BWDIK?? This is an interesting article FWIW........ Ignoring Slowdown, U.S. Companies Spend to Boost Productivity 03/06/01 11:10 AM Source: Bloomberg News URL: cnetinvestor.com Peoria, Illinois, March 6 (Bloomberg) -- While many U.S. companies are watching their costs as business slows and orders drop, others have adopted a tactic sure to gladden Alan Greenspan's heart: spend your way out of a slump. The Federal Reserve Chairman told Congress last month growth would pick up later this year in part because companies will increase spending on computers and other equipment that helps improve worker productivity. Count Caterpillar Inc. and Intel Corp. among those doing their part. Caterpillar, the world's largest maker of construction and mining equipment, and Intel, the world's biggest computer-chip maker, are betting a wired world will help increase sales while lowering costs. ''The Internet will continue to drive increased productivity, new forms of communication and entirely new product categories well into the future,'' Craig Barrett, Intel's chief executive officer, said last week. ''Now is the time to invest for that future.'' Intel will spend $7.5 billion on new manufacturing equipment this year, Barrett said. ''What we really need to do is prepare for the next up cycle,'' he said. ''You never save your way out of a recession. We're going to grow our way out of the recession with great new products.'' U.S. Slowdown Economic growth in the U.S. slowed to a 1.1 percent annual rate in the fourth quarter, the worst in five years. Still, productivity grew faster than expected in that quarter and put in the best performance last year since 1983, a Labor Department report showed today. That's helped companies protect profit margins during the slowdown. Productivity rose at a 2.2 percent annual rate in the fourth quarter, faster than the 2 percent rate of growth expected by economists. For all of last year, productivity rose 4.3 percent, the best since a 4.5 percent jump in 1983. The economy's slowdown has been concentrated in manufacturing. New orders at U.S. factories fell 3.8 percent in January, led by a drop in aircraft bookings, a Commerce Department report showed today. Excluding aircraft and autos, orders declined for the third time in four months. The slump in manufacturing is a particular challenge for the 76-year-old Caterpillar. To maintain profits, the company plans to spend $350 million to upgrade computer systems and quality control, said Lynn McPheeters, the company's chief financial officer. Linking Customers Caterpillar is using the Internet to link customers with the company's 207 dealers. The company has also developed an Internet- based joint purchasing system that it estimates will save $100 million this year. Today Caterpillar announced a big payoff from its investment in research and development. A new emissions control system the company developed for truck engines will cut pollution while lowering operating costs for truck operators. That's just what Greenspan wants to hear. Living standards rise along with productivity, because workers can produce more for less. Investment in productivity-enhancing equipment like computers helped keep annual gross domestic product growth over 4 percent for the past four years. After growing at an annualized pace of almost 64 percent during the first nine months of last year, however, production of computers, semiconductors, and communications equipment increased just 1.3 percent in December and at a 22.5 percent annualized pace during the last three months of the year. The Fed is betting on a turnaround. ''The prospects for sustaining strong advances in productivity in the years ahead remain favorable,'' Greenspan told the House Financial Services Committee last week. ''Although recent short-term business profits have softened considerably, most corporate managers appear not to have altered to any appreciable extent their long-standing optimism about the future returns from using new technology,'' he said. 'Challenging Year' Given the country's excess construction and manufacturing capacity, Caterpillar is projecting ''another challenging year'' ahead, according to the company's annual report. Profit will fall and sales will be little changed this year because of the slowing economy and increased investment spending, Caterpillar said in announcing its 2000 sales figures on Jan. 18. Nevertheless, the short-term loss is worth it, chief executive officer Glen Barton said. Investments to improve quality control and worker productivity ''should help us grow, lower costs and reach unprecedented product quality, thus yielding higher profit levels,'' Barton said. Caterpillar forecast a 5 percent to 10 percent decline in demand for construction equipment in North America even if the Fed cuts its target rate for overnight loans between banks to 5 percent from 5.5 percent in the second half of the year. Demand should increase in the third and fourth quarters, the company said. Intel CEO Barrett agreed. ''The response time from the Fed taking an action and when you see something in the market is nine to 12 months,'' he said. ''We're taking it one quarter at a time. We're continuing to invest heavily in research and development.'' investor.cnet.com Ö¿Ö