Manufacturers Will See Slowdown In 2007

Jan. 11, 2007
Manufacturers Alliance/MAPI Business Outlook Index slips to 54.

Breaking a streak of 16 consecutive quarters whose index reading was 60 or above, the December 2006 Manufacturers Alliance/MAPI Survey on the Business Outlook shows a composite index of 54. What that means is that the U.S. economy will slow down in 2007, although the industrial component of the economy will still experience growth.

A composite business index above 50 indicates that overall manufacturing activity is expected to increase over the next three months to six months.

"The decline in the composite index and most of the individual indexes indicates a slowdown in manufacturing activity," said Donald A. Norman, Ph.D., Manufacturers Alliance/MAPI Economist and survey coordinator. "Nonetheless, most senior financial executives expect manufacturing activity will expand for all of 2007. The increases in the export and investment indexes also suggest that any slowdown will be of relatively short duration."

Indexes that showed growth were the investment index, which surveys executives on their capital investments. It rose eight points from last year. The research and development index also increased 4 points, which points to the "underlying strength in manufacturing", according to the report. The export orders index edged up two points as well.

Showing decreases were the backlogs index which experience a large decrease dropping to 57 from 71 in 2005 and the capacity utilization index which decreased 12 points as well but still remains above its long-term average.

Looking toward the future, 61.8 % of senior financial executives expect moderate to signification growth in profits in 2007.

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