CHICAGO (Reuters) - The weakness in the U.S. economy caused by the slowdown in the auto-making and residential and commercial construction sectors doesn’t appear to be spreading rapidly into other corners of the domestic economy or reverberating overseas, top executives told the Reuters Manufacturing Summit this week.
“No sign of slowdown in order rates,” said John Rice, a vice chairman at General Electric Co (GE.N) who heads the company’s infrastructure unit.
“From a global perspective no sign of big impact. For now things continue to look strong.”
While acknowledging that the current environment was “as murky a time to predict as I have even seen,” David Cote, the chairman and chief executive of Honeywell International Inc (HON.N) said concerns of a full-blown recession were overstated -- and possibly self-fulfilling.
“The press and the financial industry are demanding a recession,” said Cote “and if the demand is great enough, by God you’ll get one. But if you take a look at our orders ... order rates are not that bad. Yeah, there’s a slowing, but it’s not a killer.”
His upbeat tone contrasted with a number of recent reports, including Institute for Supply Management data showing a sharp and unexpected plunge in nonmanufacturing activity in January, that have led some economists to believe the downturn that began in the U.S. housing market was spreading.
In part, the optimism seems to be a function of pricing power, which the CEOs said they were continuing to enjoy -- even as many of them wrestle with rapidly rising commodity prices -- as well as strength in overseas markets.
“Our ability to get price realization to cover material costs pressures has been pretty good,” Caterpillar Inc (CAT.N) CEO Jim Owens told Reuters. “We’ve been able to exceed that.”
The optimism was not unanimous, and a few executives said they were seeing some signs of contagion.
Bill Zollars, the CEO of YRC Worldwide Inc (YRCW.O), the world’s largest trucking company, said he was seeing signs that slowing U.S. economic growth was beginning to spread to the global economy.
“We have also seen something recently that we have not seen in a long, long time, and that’s the port activity has begun to slow a little bit,” he told Reuters.
“This thing is becoming global,” he added. “That was our worry right from the beginning that this would not be limited to the U.S.”
David Speer, the CEO of Illinois Tool Works Inc (ITW.N), said he too was “seeing obviously the weakness in the general industrial economy spreading.”
But for the most part, the CEOs at the summit said they were optimistic the softness would remain confined to the United States and to the sectors already affected
Indeed, Caterpillar’s Owens said his biggest concern wasn’t the possibility that a weak U.S. economy would pull the rest of the world into a recession, but the possibility that the next administration in Washington might try to isolate the U.S from global trade.
“I still think the worst-case scenario is an inward turn, a protectionist turn, by the U.S. government,” Owens told Reuters.
“That would be, I think, catastrophically bad for large U.S. multinationals that are competing successfully and winning in the global marketplace and for the U.S. economy, which has in fact been a leader in terms of competing effectively in the international economy.”
(For summit blog: summitnotebook.reuters.com/)
Editing by Jeffrey Benkoe