Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, January 8, 1995                   TAG: 9501060058
SECTION: BUSINESS                    PAGE: F-4   EDITION: METRO  
SOURCE: KIMBERLY N. MARTIN STAFF WRITER
DATELINE:                                 LENGTH: Medium

MANUFACTURERS GROWING, IF SLOWER

Going into the year, economists had predicted a 2 percent increase of factory output, meaning little to no growth, and a small increase in employment.

But manufacturers exceeded both those predictions. In Western Virginia they experienced about a 2 percent increase in employment, while statewide manufacturers barely held their own in employment, said the Virginia Employment Commission's senior economist Bill Mezger.

And nationally, manufacturers increased output by about 5 percent. Although no numbers are available for Virginia, Webb said it should be in-line with the national increase.

Two factors drove that boom: increased consumer spending and business investment in equipment, Webb said.

That's not expected to carry over into 1995, however.

Webb blames satiated demand for houses and durable goods, such as automobiles, plus climbing interest rates and raw material costs as factors governing this year's predicted slowdown.

Still, he said, manufacturing growth will only slow, not lose ground, thanks to an increasing foreign market for American goods.

"Freer trade with Japan, Germany and Mexico means exports will grow very strongly next year," Webb said. Manufacturers "won't be growing as fast in 1995, but they're poised to have a pretty good year."

The region's manufacturers agreed with Webb's analysis, based on the Federal Reserve Bank of Richmond's most recent monthly survey.

For the second consecutive year, factory operators were optimistic about growth in hiring as they projected six months into the future. They also expect to see some increases in raw material costs, said Federal Reserve economist Robert Graboyes, who conducts the survey.

"Their margins are getting squeezed," Graboyes said of factory profits.

But manufacturers said they expect marked increases in exports to make up the difference, thanks to the North American Free Trade Agreement and other free trade agreements, he said.