| In The News #11 >> | ||
>> TITLE Capacity Glut Begins to Ebb Lead Story-Dateline: >> SUMMARY For three years now the U.S. economy has suffered from tremendous overcapacity in several industries. Office space, fiber optic bandwidth, and airline seats have all been dealing with a supply glut stemming from huge expansions in the late 1990s. For example, manufacturing capacity expanded by over 30% in the five years ending in mid-2000, the largest expansion in 50 years. The expansion in telecommunications was even more drastic with Trans-Atlantic fiber optic capacity increasing 14-fold in the past few years. But now the tide is turning as the capacity glut begins to dwindle due to increasing product demand and corporate restructuring. Suppliers in many industries have closed their doors and the remaining firms are beginning to look at new capital spending projects—and ultimately new hires to staff these plants. One of the few remaining economic recovery obstacles appears to be receding. >> Talking it Over and Thinking it Through
>> Thinking About the Future As consumer demand continues to pick up, firms will eventually grow more optimistic and begin to buy capital goods again. This added stimulus should increase the speed of the recovery and also begin to show up in the unemployment numbers. As output expands, more people will be called back to work and consumer optimism should pick up as a result and provide further stimulus. Fiscal and monetary policy makers may be forced to make a quick shift from stimulus mode to once again fighting inflation as the economy heats up.
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