Editorial: Manufacturing Gains Spark Market, Spirits

img src="/sites/default/files/images/articles/printeditiontag_new.gif" width=120 align=right>The nation’s stock markets posted their biggest rally in two and a half months after a national survey last week showed a marked increase in U.S. manufacturing activity.

The Institute for Supply Management reported Jan. 2 that its index of manufacturing business conditions rose to 54.7, much higher than the 50.3 analysts were expecting. In this survey, 50 marks the line between growth and contraction.

The manufacturing news seemed to fly in the face of other indicators that reflected a relatively weak holiday buying season. And the news drove the Dow Jones Industrial Average up by more than 265 points on the first day of trading in 2003 to close above 8600.

But analysts warned not to put too much stock in the manufacturing number yet. “I don’t think it’s time to pronounce that manufacturing is ready to make a strong recovery,” said Norbert Ore, who heads the study.

Concern about a possible conflict in Iraq has held down economic expectations in recent months, dampening consumer confidence, which in turn has depressed consumer spending.

Meanwhile, truckers are reeling from the 9-cent-a-gallon spike in the U.S. diesel-fuel price average over the past two weeks, which sent prices to $1.469, the highest level since the terrorist attacks of 2001. Diesel jumped to $1.527 the week following 9/11.

Last week, oil prices were being driven higher by the labor unrest in Venezuela, which has shut down much of that nation’s oil industry, a major supplier to the U.S. market.

The virtual cessation of Venezuelan oil exports has contributed to an 8.2% decline in U.S. distillate inventories from last year. Distillates are used to produce both diesel fuel and the similar home heating oil.

Truckers are already warning that fuel surcharges and rate increases are coming unless the situation is resolved quickly. Analysts are warning that a quick fix is unlikely.

“Even if workers went back to work, the [Venezuelan oil] industry wouldn’t be back to normal until late January or early February, and that is what is scaring some people,” said Tom Kloza, director of the Oil Price Information Service.

The two recent weeks of price increases more than wiped out the 6.8 cents a gallon of declines since Oct. 21.

This article appeared in the the Jan. 6 print edition of Transport Topics. Subscribe today.