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Lesson 3 Annual Report on American Economy I.Teaching Points: 1. the annual report 2. the performances and problems of the American economy in the past year 3. the prospects of American economy for the new year 4. the terms: capital goods, business cycle, unionized plants, the weak dollar 5. the difficult sentences in the text II. Teaching Aim: 1. understand what the annual report is 2. understand the performances and problems of the American economy in the past year 3. understand the prospects of American economy for the new year 4. understand the terms in the text 5. understand the difficult sentences in the text III. Teaching Process 1. Introduction to the Text At the beginning of each year, Forbes(福布斯),an influential American business magazine, makes its annual report on the American economy, examining the performances and problems of the economy in the past year and looking at its prospects for the new year. This text is part of its 1995 annual report, covering three sections of the economy: capital goods, construction, and consumer nondurables. Capital goods industrials performed pretty well in 1994 despite the problems of pricing and rising raw materials costs, and will probably repeat the performance in 1995. In the construction industry, nonresidential building will have potentials for further development along with a continuing slide in housing sector in 1995. But there are still hopes for hosing sector. The general trends for consumer nondurable industries will be a continuing increase in spending by consumers and price hikes by suppliers. Specifically, however, different industry will be confronted with a different situation. 2. Reading for gist Read the text with about 15 minutes, and then try to answer the following questions: 1.What problems are capital goods firms confronted with? 2.Why are capital goods firms so cautious as not to add new capacity soon? 3.Which Sector of the construction industry will show a slide this year? What makes this possible? 4.Is there any business opportunity for housing industry at all? Why (not)? 5.How is it that nonresidential construction will have potentials for further development? 6.How have the Federal Reserve’S recent efforts affected non-durables industry in general? 7.How do nondurables companies cope with price hikes in raw materials? 8.What are the pmspects for personal care,apparel,and footwear companies respectively? 3. Detailed Study of the Text Capital Goods (See Note 1) “We’re nervous,” says Frederick Stratton, chairman of Briggs & Stratton, the $1.3 billion (sales) leader (the leader in sales, the leading company in the volume of sales) in small gas engines (engines that use gas as fuel) and auto locks (汽车锁 / 保险装置). “We don’t know if (wether) this is the peak of the cycle (See Note 2), or a midpoint in the intermediate trend. We think it’ the midpoint.” But Stratton acknowledges (admits) he could be wrong and says his company, like many capital goods firms, won’t be adding new (productive) capacity (at) any time soon. Why the caution? (Why is there the caution? / Why do they have caution?) The machine tool industry (机床制造业) reports its highest bookings (business orders) since 1980 in the third quarter of 1994, and backlogs (n. business orders that have not yet been filled or carried out. 尚未交货的订单) remain high. The problem is pricing (the setting of price, 定价, 价格变化). Many companies operate well below full capacity and can’t raise prices. “We can’t get big price increases.” reports William Jordan, president of Duriron Co., which sells to the chemical industry (sell to..., sell sth. to..., sell products to the chemical industry ). Echoing Jordan (agreeing with Jordan), Parker Hannifin Chief Executive Duane Collins says his sales increase last year was due more to new orders than to price increases. Weak pricing (价格疲软,价格行情疲软) creates anxiety because raw materials costs are rising. Tecumseh Products is a big user of commodities like aluminium; prices for these inputs (costs / materials inputs) rose sharply in 1994. Given (Even there are) rising prices and rising raw materials costs, margins held up remarkably well (profits were pretty goods, hold up: keep, go on, continue) last year. Many outfits (equipment needed for production) can absorb suppliers’ price hikes (accept and endure suppliers' price increase without raising the prices of one's own products), thanks to strong productivity improvements (because productivity has been greatly increased by a lot of newly-improved machinery and equipment, which reduces production cost. This is why these outfits can absorb suppliers' price hikes.) in recent years. Will the companies be able to repeat 1994’s performance in 1995? There are reasons for optimism. The weak dollar (See note 5) helps international companies boost (increase, expand greatly) overseas sales, particularly in Asia. There are victories on the labor front (aspect / respect / point), too. Caterpillar’s strike by the United Auto Workers hasn’t cut into earnings (affect or reduce the amount of income earned by a firm). Briggs & Stratton is shifting jobs from (changing jobs of) unionized plants (See note 3) in the North and will open three nonunion plants in the South, where productivity is higher. Likely winners in 1995 will be companies supplying the strong auto market and the diversifying aerospace business. But watch out for (watch out for: be cautious, keep close eyes on...) firms that sell to weak industries (市场疲软的行业) like oil and residential construction---respectively. Construction Like a runner in a relay race (a race in which each member of a team runs, swims or otherwise covers a certain part of the distance, 接力赛), the construction industry hopes to smoothly pass the baton from the already slowing housing sector to nonresidential building in 1995 (move from the housing sector to nonresidential construction for continuing growth, like passing the baton<接力棒> in a relay race of running). If things work out this way, Robert Murray, chief economist with McGraw-Hill’s F. W. Dodge construction information unit, expects overall spending on construction to continue its three-year-long recovery, climbing 3% this year, to $294 billion. Spending on hotels, highways, factories and prisons will pick up the slack (will recover from the dull state of business) as single-family housing slows. Housing, interest-sensitive as always, began to cool in late fall, as mortgage rate (See note 4) increases began to influence demand. Housing starts (start: n. starting point, the beginning of doing sth., so, housing starts: 住房动工) were still expected to finish the year up 11%, to 1.43 million homes, according to the National Association of Homebuilders. This year will almost certainly show a slide. How severe (great, tremendous) a slide? That depends on Alan Greenspan (That depends on what action Alan Greenspan will take. See note 6 for more information), but even he doesn’t know for sure (for sure: adv.确实, certainly, surely) where interest rates are heading (heading for somewhere). Not everyone has given up on housing, however. Donaldson, Lufkin & Jenrette housing analyst Barbara Allen reasons (deduced) that despite the rise in interest rates the more affluent (rich) part of the population will trade up to larger houses (Am.E, will buy larger houses at higher prices) or build extensions (extending part to a house) on current ones, so long as the economy remains strong. “One of the major myths (a belief, opinion or story that is not based on the fact or reality) that Wall Street (n.华尔街) holds about empty nesters (people who live in large, empty houses) is that they move down in house size and price points (they will move according to the house size and price points, especially move to the small size, cheaper houses),” Allen says. “House size corresponds with (is in line with) income, not with the number of people living in the house.” Allen thinks spending on repair and remodeling (reconstructing, rebuilding) may soon surpass (exceed, outpace) spending on new home construction. She sees (notices) buying opportunities (the good opportunities for buying something) in diversified (all kinds of) home builders (住房建筑公司) like Centex, Pulte and Lennar, whose shares have all been hammered (beaten) lately (recently). She also has high hopes for building materials companies (建材公司) like Owens-Corning, USG Corp. and Mueller, a maker of copper and brass fittings (黄铜配件). But interest rate rises seem to pose less of a threat to nonresidential construction than to residential (form a threat to residential construction rather than to nonresidential construction). Reason: As long as corporate profits remain strong, businesses will build factories. Nonresidential construction is less interest-rate sensitive than housing but (and is) more corporateprofits related.” There’s been a big pickup (acceleration) in pricing for ( in pricing for: 在为...定价方面) chemicals and paper but little in the way of new capacity (but little pickup / acceleration in the aspect / use of a new capacity),” observes Carey Callaghan, an engineering and construction analyst at Lehman Brothers. “Typically, three years into a recovery (typically, if there is a three-year-long recovery...) you would see a pickup in industrial construction, and ("and" here means "but") we haven’t seen it yet.” That would be good news for engineering giants Fluor and Foster Wheeler. Both should benefit from an uptick (benefit from an increase) in domestic chemical and paper construction (the construction of chemical and paper factories), with even better prospects overseas. Smith Barney recently reported that worldwide demand for new power-generating capacity (the capacity of generating power, 新的发电能力) could top $1 trillion (trillion, 兆) over the next decade. Half of that new demand is coming from Asian countries. (In fact,) There’s more (demands) to that (nonresidential construction) than wishful thinking (痴心妄 想). Foster Wheeler has $1.2 billion worth (value) of bids (an offer of the price at which one---the bidder agrees to supply goods or undertake a construction project, 投标) outstanding (unsettled / unpaid) for boiler (boiler: n. 锅炉,烧水器) orders in China alone. That’s also good news for cement and aggregates firms (水泥和混凝料公司) like Hanson, Vulcam Materials, Lafarge and Southdown, which are pushing through (stimulating) price increases for the first time in years (第一次在数年内促进了价格的上涨 / 上升), thanks to increased worldwide demand. Consumer Nondurables Despite the Federal Reserve governors' efforts throughout 1994 to cool the economy (to cool the overheated economy ), unemployment remains low and consumer spending high. Spending on nondurables—everything from soap flakes (肥皂块, 香皂块) to razors to tennis shoes—rose 3% last year. That was the first year that spending on consumer nondurables kept pace with (were in line with) the rise in income. And both (spending and income, ------but spending largely depends on the perfect insurance system, ------China and America as two typical examples) are expected to increase this year at the same rate. Higher raw materials costs are forcing many producers to raise prices. Clorox, for instance, which has 67% of the liquid bleach market (漂白剂市场), recently announced a 6 % price hike (price increase). Procter & Gamble just raised prices on its paper products by as much as 8% . Those firms with a dominant market share (with an overwhelming market share) should have an easy time (have an easy / a hard time doing something) holding on to (remain, keep) those price increases. But privatelabel companies (private-owned companies) that depend on low costs to keep their own prices low will certainly have a tougher time (have a tough / difficult / hard time). Rather than slap new stickers (n. 1.不干胶标签;不干胶贴纸; 2. 不屈不挠的人, 滞销物,滞销货) on old products (stick new pricelabels or price-tags on old product, that is, increase the prices of old products), shaving giant Gillette (修面业巨头吉利 / 吉列公司) is introducing a higher-priced product within an existing category. The company just launched (started to produce and sell) its Sensor Excel razor in the U.S. at a 20% premium (at a 20% additional value) over its hugely successful ($201 million 1994 US sales) Sensor. Sensor already has a 23% share of the wet shaving (a type of shaving) and blade market (剃须刀片市场)in the U. S.; the new razor could add another four points of share. Gillette earns 33% on shareholders' equity (The 33% Gillete earns on shareholders' equity is the return on equity, 股东产权盈 利), making it one of the country's most profitable companies. U.S. personal care (personal care: n. The occupation of attending to the physical needs of people who are disabled or otherwise unable to take care of themselves, including tasks such as bathing, management of bodily functions, and cooking. 人身护理. 一种职业,出于那些残疾人或无法料理他们自己的人的 身体需要而照顾他们,包括这些任务,如洗澡、处理身体功能和 烹调等) and consumer product companies are busily expanding overseas—particularly in Asia. In China, Avon is pumping up its sales force (is strengthening its team of people for sales), Gillette has started making toothbrushes, and P & G signed more joint ventures. Duracell is building plants in China and India, which should come on line ("which" refers to the plants. They are expected to become ready for use this year.) this year. And Colgate bought India's largest toothbrush company, giving it three-quarters of that potentially huge market (making it have three-quarters market shares...giving it three-quarters market shares of that market which is potentially huge). The news was mixed (There were good news and bad news) last year for apparel manufacturers (clothing manufacturers). The absence of a strong fashion trend put women's apparel in the doldrums (make the business of women's apparel a dull, inactive business. put sb. in the doldrums: put sb in low spirits. 由于缺乏 一股强劲鲜明的时装趋势,女装业十分不景气). Liz Claiborne, for example, showed a 34.8% earnings decline for the latest 12 months. Market expansion overseas is still difficult for U.S. apparel firms, given the fragmented boutique environment abroad (1. with the situation in which shops selling their clothes are scattering here and there abroad. 2. fragmented: scattered; 3. environment: situation; 4. boutique: n. a small shop selling clothes, costumes, hats of the latest fashion. 5. Compare: "Given your scenario" <lesson 2>: supposing things are like what you describe; "Given (Even there are) rising prices and rising raw materials costs"<lesson 3> ). U.S. apparel companies continue to try to capture some of the retail margin for themselves (obtain, earn some profits from selling to Americans by retail). Jones Apparel, for example, opened 40 outlet stores (outlet stores: 分店, 销售点) in 1994 and has another 50 slated for this year (1. has decided to open another 50 outlet stores this year. 2. slate: Am. colloquial. propose sb. for an office, a position, and so on. Here it means: to be opened, or decided to open). In footwear (n. <美>鞋类<鞋,靴,拖鞋等>), Nike and Reebok both made comebacks (comeback: n. recovery, become better), with latest 12 months' return on equity (return on equity <股东资产净 值盈利>, that is, return on investment <投资报酬率>) of 17.2% and 29. 3% , respectively. Both companies have been exploiting (developing, using) the $ 600 million outdoor footwear market (户 外/室外运动鞋/鞋类市场). And while the athletic footwear makers (运动鞋制造商) expect big growth from foreign expansion, they are still finding ways to (the phrase: find ways to do something) increase sales in the U. S. Smith Barney senior analyst (首席分 析家, compare: chief economist) Faye Landes figures (believes, thinks, predicts) Nike and Reebok could grow up to 12 % annually, 5 % in the U.S. alone , over (in / within) the next few years. In the textile industry (纺织工业), higher costs for raw materials like cotton (up 20% last year) and slow sales of women's clothing have hurt some of the smaller mills (smaller factories). Many more mills, which depend heavily on the auto and household sectors (which depend heavily on the sales / performance of auto and houses / residential buildings ), will face tougher times if higher interest rates choke off (choke off: <colloquial> make sth. difficult, or put an end to sth.) sales of cars and homes (How can higher interest rates choke off cars and homes? Recall the fact that most Americans buy cars and homes with a mortgage. ). Homework 1. Exercise II, V. 2. Annual Report Writing: According to the functions and structure of "annual report on one nation's economy", try to write an annual report on Chinese economy in which you examine the performances and problems of Chinese economy in 2006 and kook at its prospects for 2007. You can write this annual report as the author of the text does, and you can express your ideas on the following aspects: capital goods, construction (residential and nonresidential construction), consumer nondurables, direct and indirect domestic investment, direct foreign investment, consumption, international trade (export and import), domestic trade (e.g., prices of products), visible and invisible trade (such as transportation, tourism...), employment......