A quarterly composite index of manufacturing business indicators fell for the eighth time in a row but remains in positive territory. The June 2012 Manufacturers Alliance for Productivity and Innovation Survey on the Business Outlook fell to 65 from 61 in the March 2012 survey.
"While the rate of decline was relatively slow from June 2011 through March 2012, the drop in the current quarter equals the decrease in the June 2011 survey, when it also fell by four points from its previous level," said Donald A. Norman, MAPI's chief economist and survey coordinator. "Unsurprisingly, the non-U.S. prospective shipments and non-U.S. investment indexes registered the sharpest declines, showing the effects of the Eurozone recession and the slowing growth in China."
Each of the 13 individual indexes included in the survey showed softening.
The export orders index, which compares exports in the second quarter of 2012 with the same quarter in 2011, fell to 63 from 79 in the March survey.
The backlog orders index, which compares the second quarter 2012 backlog of orders with that of one year earlier, fell to 58 from 71 in the March report.
The current orders index, based on a comparison of expected orders in the second quarter of 2012 with those in the same quarter one year ago, declined to 70 in June from 77 in the March survey.
Based on a comparison of inventory levels in the second quarter of 2012 with those in the second quarter of 2011, the inventory index increased to 73 in June from 67 in March, indicating levels are rising and products are remaining on the shelves longer.
The capacity utilization index, based on the percentage of firms operating above 85% of capacity, dropped to 35.2% in June from 40.0% in March but remains above the long-term average of 32%.
The profit margin index slipped to 68 in June from 69 in March.
Forward Looking Indexes Decline
All seven forward looking indexes declined but as a group still remain well above 50, the dividing line between expansion and contraction.
The prospective non-U.S. shipments index, which measures expectations for shipments abroad by foreign affiliates of U.S. firms in the third quarter of 2012 compared with the same quarter in 2011, fell to 60 in the current report from 77 in the March survey.
The non-U.S. investment index, based on expectations regarding capital expenditures abroad in 2012 compared to 2011, declined the same, to 60 in the June report compared to 77 in March.
The interest rate expectations index was 51, down from 62, continuing the sentiment that longer-term interest rates are expected to rise by the end of the third quarter of 2012.
The annual orders index, based on a comparison of expected orders for all of 2012 with orders in 2011, eased to 79 in June from 88 in March but remained at an impressive level.
The research and development spending index surveys participants regarding R&D spending in 2012 compared to 2011. The index was 72 in the June report compared to 76 in March.
The prospective U.S. shipments index, which reflects expectations for third quarter 2012 shipments compared with the third quarter of 2011, dropped to 75 in June from 77 in the previous report.
The U.S. investment index is based on executives’ expectations regarding domestic capital investment for 2012 compared to 2011. The index was 73 in June, down slightly from 74 in March.
Sustainable Business Practices Reported
In a supplemental section, participants were queried on the growing trend of sustainable business practices within manufacturing.Sixty-three percent of the respondents reported that their companies have formally adopted sustainable business practices and another 7% indicted that there are plans to do so.
Companies have formally or informally adopted a wide range of sustainable practices. Energy management and use strategies are the most common practices, cited by 81% of the respondents, followed by corporate recycling, mentioned by 71%. Just over one-third (34%) indicated that their companies engage in carbon management or have set carbon emission goals.
Despite the fact that most companies have adopted sustainability business practices, just 25% produce a stand-alone sustainability report and another 4% include a summary of sustainability practices in their annual report. Sixty-two percent do not report on such activities.
MAPI’s composite business outlook index is a historically accurate near-term preview of business prospects for the manufacturing sector and is a leading indicator of the Federal Reserve’s industrial production index.