'Steady Growth' Expected For Most Of U.S. Industry

Autos appear to be exception to strength in manufacturing alliance index.

The manufacturing sector of the U.S. economy is expected to continue to show "steady growth" during the next three to six months, according to the Manufacturers Alliance, an Arlington, Va.-based business and public policy research group. Its quarterly composite business outlook index, released April 13, held steady at 74 in March.

"While a few manufacturing industries--in particular, the auto industry -- face challenges, the overall manufacturing sector appears to be on very solid footing for at least the near term," says Donald A. Norman, the alliance economist who oversees the survey from which the composite index and several individual indexes, including some not part of the composite, are compiled.

The composite index is a weighted sum of manufacturers' prospective shipments, backlogs, inventories and profit margins. Norman characterizes the current figure of 74 as being "at a high level." Indeed, the index level of 74 from December 2005, which was matched in March 2006, had been the highest figure in five calendar quarters.

Sixty-two senior financial executives among the alliance's 450 member companies participated in the most recent survey of current and future business conditions. Questionnaires were sent to them at the end of February and responses were due by March 31.

The prospective shipments segment of the composite index, which compares expected quarterly shipments with actual quarterly shipments the year before, remained "a strong 90% in March, the same as in December," reports Norman. "The expected year-over-year growth is particularly significant because shipments in the second quarter of 2005 were rising," he adds. Eighty-four percent of the executives responding to the survey are expecting shipments to increase in the second quarter of 2006; only 5% foresee a year-to-year decline.

The backlogs index, which measures the extent to which new orders exceed shipments, was 77% in March, down two points from 79% in December 2005. That's not troubling to Norman, who stresses that the index is "at a relatively high level and has changed little during the past four calendar quarters."

The inventory component of the composite index rose to 67% in March from 64% in December. Eighteen percent of the executives reported inventories at their companies were lower, on a year-to-year basis, during the first quarter of this year. Fifty-two percent, however, reported inventories were higher.

The profit margin index, the fourth of the composite index's four elements, increased from December to March, its second consecutive quarterly gain. At 82% in March 2006, it was eight percentage points higher than December's 74% and set a new high for this measure. The previous high was 79% in June 2004.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish