Manufacturing Outlook Appears Promising for '94

New economic indicators raise business and consumer confidence

RON BULLOCK, president of Bison Gear & Engineering Corporation in Downers Grove, Ill., is feeling good about the economy. So good, in fact, he's planning to expand his payroll by some 10 percent this year and invest in some expensive plant equipment.

Economists and analysts who are bullish about economic-growth prospects are looking to businesses like Mr. Bullock's to provide the biggest push.

Manufacturers account for 22 percent of the overall United States gross domestic product. Add to that already-sizable chunk of US output another dimension - the suppliers and services feeding into and off of manufacturers, such as power companies and health-care providers - and the importance of this sector grows even larger. (Experts say manufacturers pay roughly 40 percent of US health-care coverage.)

National Association of Manufacturers members won't be ``taking off, but strengthening their position in 1994,'' president Jerry Jasinowski says. He is watching three trends that are improving firms' balance sheets:

* The growing emphasis on ``people empowerment'' (giving workers job training, a hand in management, and a financial stake in the firm).

* Increased global marketing and commercialization to push US products into foreign markets.

* Productivity gains through modernization and greater use of technology.

In recent weeks, the federal government has released strong economic data. The Commerce Department's index of leading indicators posted its fourth gain in a row in November and signals increased economic activity six-to-nine months in the future. Consumer confidence climbed, buoyed by better forecasts. And, fueled by low interest rates, home sales jumped to record levels.

This bodes well for manufacturing, as consumers and new homeowners buy more clothing, household items, and durable goods.

Barbara Kasper, owner of Inter-Lakes Bases Inc., in Fraser, Mich., provides supplies to the machine-tool industry, which is projected by the Commerce Department to be the fastest-growing manufacturing industry in 1994. She employs 35 and plans to hire three more people this year.

The 10 fastest-growing manufacturing industries in 1994 are being propelled by domestic demand for cars, housing, computerization, health care, and environmental equipment, says Commerce Undersecretary Jeffrey Garten.

The improved economic picture is reflected in business confidence. Among entrepreneurs, Ms. Kasper says, there seems to be relief, if not agreement, about administration tax policies. ``No one likes indecision or uncertainty. We now know the tax base, and we now know who's in office.''

Bullock says his family-owned firm, with $25 million in annual sales, will be hit by higher taxes. ``We'll have a little less to plow back into the business, and that's a key element toward growth,'' he says. Many of his customers ``are in a similar tax situation.''

NAM economist Gordon Richards says producers are also benefiting from low oil prices and overseas-market gains. ``Manufacturing is more energy-intensive in terms of inputs than the economy as a whole,'' he says. American industrial exports are now fierce competitors globally, thanks to low exchange rates and enhanced US productivity. ``Export growth has actually increased since the summer, despite the recession overseas,'' says Mr. Richards, who expects that trend to continue.

The Commerce Department's 1994 industrial outlook acknowledges the weak markets for US manufacturers in Europe, where many countries are in ``a subdued recovery from recession.'' But it highlights growth in the developing countries, principally Asian and Latin economies, which will account for most of the increase in US exports this year.

The best way to ensure a growing economy is to help firms orient themselves internationally and to gain greater access to closed markets, Mr. Garten says.

Entrepreneurs could certainly use the federal government's muscle. ``Some 40 percent of our sales are exports,'' says J. W. Kisling Jr., chairman and CEO of the Multiplex Co. Inc., in Ballwin, Mo. Europe is the top market for its drink-dispenser products, but the Pacific Rim and Latin America are its fastest-growing outlets.

But business gets its biggest boost by developing its own progressive policies, Mr. Kisling says. He points to his firm's success with putting employees through courses, financing their purchases of computers, and making all salaried employees shareholders.

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