WASHINGTON (MNI) – The following is the statement on quarterly U.S.
Business Outlook released Thursday by the Manufacturers Alliance:
Manufacturers Alliance/MAPI Survey on the Business Outlook:
Index at 75 Percent as Sector Continues to Show Strength
Results Indicate Expansion, but at a Slower Pace;
Senior Financial Executives Surveyed on Implications of a Falling
Dollar
Thursday, January 13, 2011; Arlington, VA. The results of the
Manufacturers Alliance/MAPI Survey on the Business OutlookDecember 2010
(ER-713), a quarterly survey, suggest continued expansion of U.S.
manufacturing sector activity, although the pace of expansion may be
slowing. The survey’s composite index is a leading indicator for the
manufacturing sector. The December 2010 composite index fell slightly
to 75 percent from 77 percent in the September 2010 report. This is the
fifth consecutive quarter the index has been above the 50 percent
threshold, the dividing line that separates contraction and expansion.
The index started as a quarterly series in 1991.
The current index is a dramatic improvement from the record low 21
percent recorded in the March 2009 survey, signaling that an impressive
turnaround for industry continues.
“The trends in the composite index and in the individual indexes
are remarkable in that most were little changed from their September
levels as they continue to remain at relatively high levels,” said
Donald A. Norman, Ph.D., MAPI Economist and survey coordinator. “The
takeaway from this quarter’s survey is ‘steady as she goes,’ although
the rise in the inventory index suggests that the pace of the expansion
has slowed.”
The business outlook index is a weighted sum of U.S. shipments,
backlogs, inventories, and profit margin indexes. In addition to the
composite index, the survey includes 12 individual indexes. Most of the
individual indexes changed very little between September and December.
The capacity utilization index, based on the percentage of firms
operating above 85 percent of capacity, improved to 33.3 percent in the
current survey from 28.1 percent in September. In addition to
continuing its upward trend since reaching a record low of 7 percent in
December 2009, the index is now above the long-term average utilization
rate of 32 percent.
The non-U.S. prospective shipments index, which measures
expectations for shipments abroad by foreign affiliates of U.S. firms in
the first quarter of 2011 compared to the same quarter of 2010, improved
to 89 percent from 84 percent. The annual orders index, based on a
comparison of expected orders for all of 2011 with orders in 2010,
increased to 90 percent in the December survey from 86 percent in
September.
The research and development (R&D) index reflects the views of
survey participants regarding R&D spending in 2011 compared to 2010.
The R&D index was 73 percent in December, slightly above the 70 percent
in the September 2009 report.
The backlog orders index, which compares the fourth quarter 2010
backlog of orders with the backlog of orders one year earlier, advanced
to 83 percent in December from 81 percent in September. An accumulation
of backlogs usually occurs when new orders exceed shipments. The
non-U.S. investment index, based on expectations regarding capital
expenditures abroad in 2011, was solid at 75 percent in December
compared to an already strong 73 percent in September.
The U.S. investment index is based on expectations of executives
regarding domestic capital investment for 2011 compared to 2010. The
index was 81 percent, a slight advance from 80 percent in the previous
survey. The inventory index is based on a comparison of inventory
levels in the fourth quarter of 2010 with those of the prior year. The
index increased to 69 percent in December from 63 percent in September,
an indication that the growth of manufacturing sales is slowing.
The quarterly orders index, based on a comparison of expected
orders in the fourth quarter of 2010 with those in the same quarter one
year ago, decreased to 87 percent in December from 89 percent in
September. The U.S. prospective shipments index, which reflects
expectations for first quarter 2011 shipments compared with the first
quarter of 2010, declined a bit to 88 percent in the December survey
from 90 percent in the September report. Despite these nominal
declines, both indexes remain at very high absolute levels. This is
particularly significant given that the indexes are based on comparisons
with a year earlier when the manufacturing sector was expanding at a
healthy pace.
The profit margin index fell to 85 percent in December from a
record high of 87 percent in September. The export orders index, which
compares exports in the fourth quarter of 2010 with the same quarter in
2009, was 80 percent in December, down marginally from 82 percent in
September.
In a supplemental component of the survey, respondents were asked
for their outlook regarding the value of the U.S. dollar over the next
year and the impact on their companies if, hypothetically, it were to
drop by 10 percent from its current value.
Sixty percent of the respondents reported that their companies’
exports would be helped to some extent if the dollar were to fall by 10
percent and 60 percent indicated that profits would rise by some degree.
A large majority, 92 percent, said that a fall in the value of the
dollar would have little effect on investment spending, and all survey
participants said it would have no effect on manufacturing location
decisions.
The survey reflects the views on current and future business
conditions of 62 senior financial executives representing a broad range
of manufacturing industries.
MAPI’s Composite Business Outlook (see chart below) is a
historically accurate near-term preview of business prospects for the
manufacturing sector and is a leading indicator of the industrial
production index.
** Market News International Washington Bureau: 202-371-2121 **
[TOPICS: MAUDS$,M$U$$$]
