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‘Cliff’ worries curtail November output in Utah, U.S.

Economy » Tax deadlock prompts firms to pull back nationally, less so in state.

First Published Dec 03 2012 05:56 pm • Last Updated Dec 04 2012 01:32 am

Manufacturing in Utah, regionally and across the U.S. shrank in November as worries about automatic tax increases that could kick in next year cut demand for factory orders and maufacturing jobs.

The Institute for Supply Management said Monday that its national index of manufacturing conditions fell to a reading of 49.5, down from 51.7 in October, and the lowest level since July 2009 — the first month after the Great Recession ended.

At a glance

Utah holds own

Nationally, manufacturing conditions are at their lowest level since the country emerged from the Great Recession in July 2009, while Utah’s index dipped but still remains at a “strong” level.

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In Utah, Colorado and Wyoming, the Business Conditions Index formulated by the Denver-based Goss Institute for Economic Research slipped to 55.9 last month, down from 58.6 in October.

Utah’s manufacturing was the strongest of the three states. Even so, its index dropped to 57.3 in November from October’s reading of 60.1, economist Ernie Goss said.

Any reading above 50 signals expansion, while readings below 50 indicate contraction; In Utah, a reading of 57 or higher is strong, Goss said.

"I would call it robust, but the movement is trending downward," he said.

The Utah index has fallen for two months from a 2012 high of 61.7, despite stronger orders for durable goods, especially computer and electronic components and metals.

"The energy sector is not as strong. It’s still growing, but it’s not quite as strong as it had been," Goss said.

The U.S. and regional reports suggest that the manufacturing sector probably will remain a weak point in the recovery for the next three to six months. Businesses expressed concerns about the "fiscal cliff," the name for sharp tax increases and government spending cuts that will take place in January if Congress and the Obama administration fail to strike a budget deal before then.

Worries about the fiscal cliff have led many companies to pull back on year-end purchases of machinery and equipment, which signal investment plans.

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"In both durable and nondurable, new orders are not quite as strong as what we’ve seen in the past. Employment growth is not as strong as what we’ve seen," Goss said.

The U.S. economy grew at a 2.7 percent annual rate in the July-through-September quarter, much better than the 1.3 percent pace in the April-through-June quarter. But most economists expect growth will slow to below 2 percent in the final three months of the year, mostly because of Superstorm Sandy and the impact of the fiscal cliff.

"Companies "are just backing off and not making any moves until things clear up a bit," said Bradley Holcomb, chairman of the Institute for Supply Management.

The Associated Press contributed to this story


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