U.S. Manufacturing Continues to Expand

Jan. 13, 2011
Industry group says pace may be slowing, however.

The results of the Manufacturers Alliance/MAPI Survey on the Business Outlook suggest continued expansion of U.S. manufacturing sector activity, although the pace of expansion may be slowing. The December 2010 composite index fell slightly to 75% from 77% in the September 2010 report. This is the fifth consecutive quarter the index has been above the 50% threshold, the dividing line that separates contraction and expansion.

The current index is a dramatic improvement from the record low 21% 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. "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."

Highlights of the survey include:

  • The capacity utilization index, based on the percentage of firms operating above 85% of capacity, improved to 33.3% in the current survey from 28.1% 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%.
  • 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% from 84%.
  • The annual orders index, based on a comparison of expected orders for all of 2011 with orders in 2010, increased to 90% in the December survey from 86% in September.
  • 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% in December from 63% in September, an indication that the growth of manufacturing sales is slowing.
  • 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% in December, slightly above the 70% 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% in December from 81% 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%, a slight advance from 80% in the previous survey.
  • The non-U.S. investment index, based on expectations regarding capital expenditures abroad in 2011, was solid at 75% in December compared to an already strong 73% in September.
  • The profit margin index fell to 85% in December from a record high of 87% in September.
  • The export orders index, which compares exports in the fourth quarter of 2010 with the same quarter in 2009, was 80% in December, down marginally from 82% in September.

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% 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% and 60% indicated that profits would rise by some degree. A large majority, 92%, 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.

Popular Sponsored Recommendations

Empowering the Modern Workforce: The Power of Connected Worker Technologies

March 1, 2024
Explore real-world strategies to boost worker safety, collaboration, training, and productivity in manufacturing. Emphasizing Industry 4.0, we'll discuss digitalization and automation...

How Organizations Connect and Engage with Frontline Workers

June 14, 2023
Nearly 80% of the 2.7 billion workers across manufacturing, construction, healthcare, transportation, agriculture, hospitality, and education are frontline. Learn best practices...

Transformative Capabilities for XaaS Models in Manufacturing

Feb. 14, 2024
The manufacturing sector is undergoing a pivotal shift toward "servitization," or enhancing product offerings with services and embracing a subscription model. This transition...

Shifting Your Business from Products to Service-Based Business Models: Generating Predictable Revenues

Oct. 27, 2023
Executive summary on a recent IndustryWeek-hosted webinar sponsored by SAP

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!