Manufacturers Are Poised To Make A Real Killing

If the economy stages a rebound soon, as the stock market seems to be anticipating, the manufacturing sector should profit big almost immediately. So says economist Susan Lakatos of Kidder, Peabody & Co., who notes that a willingess to slash jobs over the past year has enabled manufacturers to keep productivity on a 2.5% to 4% growth track in the face of declining volume. As a result, unit labor costs in manufacturing last quarter were up only 1% over their year-earlier level, while prices (helped somewhat by strong petroleum prices) were up about 5%.

"Last quarter was the first recession quarter ever," says Lakatos, "that factory margins didn't get squeezed." With inventory costs also under control, commodity prices weak, and interest costs falling, she predicts that "manufacturers could make a lot of money if Fed easing succeeds in stimulating sales."

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