Manufacturers Enjoy Surge in Business --- Strong Growth May Lead To Further Tightening By Fed, Executives Fear
PALM BEACH GARDENS, Fla. -- American manufacturers are barreling into 1995 like a locomotive. Their big fear: that today's strength will tempt the Federal Reserve Board into slamming on the brakes too hard.</br></br>As executives prepared for the winter meeting of the National Association of Manufacturers, which began here yesterday, interviews with a number of those attending the meeting reveal widespread nervousness about a possible economic slowdown beginning in the middle of this year -- but few concrete signs of it arriving yet. Indeed, conditions are so strong that some executives say they are able to raise prices on their products for the first time in several years, a possible harbinger of higher inflation.</br></br>"We see very strong growth," says Donald Rainville, president of Universal Dynamics Inc., a small company in Woodbridge, Va., that manufactures machinery used in making plastics. Varian Associates Inc., a Palo Alto, Calif., maker of healthcare systems, semiconductor equipment and electron devices, ended last year with record orders. At Tenneco Inc., which had fourth-quarter and full-year earnings gains of more than 50%, orders for farm machinery, construction equipment and auto parts continue to be strong, while the company has advance orders for all the containers and container board it can make.</br></br>"Our business conditions are excellent," says Dana Mead, chairman and chief executive of Tenneco, and vice chairman of the association's board. But the association, which represents 12,000 manufacturers, doesn't expect conditions to remain that way.</br></br>Gordon Richards, the association's chief economist, expects gross domestic product to grow under 3% this year, compared with 4% in 1994. With interest rates sharply higher than last year at this time, many members see a slowdown as inevitable -- beginning with the interest-rate sensitive industries like automotive and housing. Fixed-rate mortgages, for example, have risen more than two percentage points in the past year and now stand at about 9.10%, a level that is beginning to discourage buyers.