The Economy

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

April 13, 2006

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.

About the Author

John McClenahen | Former Senior Editor, IndustryWeek

John S. McClenahen, is an occasional essayist on the Web site of IndustryWeek, the executive management publication from which he retired in 2006. He began his journalism career as a broadcast journalist at Westinghouse Broadcasting’s KYW in Cleveland, Ohio. In May 1967, he joined Penton Media Inc. in Cleveland and in September 1967 was transferred to Washington, DC, the base from which for nearly 40 years he wrote primarily about national and international economics and politics, and corporate social responsibility.

      McClenahen, a native of Ohio now residing in Maryland, is an award-winning writer and photographer. He is the author of three books of poetry, most recently An Unexpected Poet (2013), and several books of photographs, including Black, White, and Shades of Grey (2014). He also is the author of a children’s book, Henry at His Beach (2014).

      His photograph “Provincetown: Fog Rising 2004” was selected for the Smithsonian Institution’s 2011 juried exhibition Artists at Work and displayed in the S. Dillon Ripley Center at the Smithsonian Institution in Washington, D.C., from June until October 2011. Five of his photographs are in the collection of St. Lawrence University and displayed on campus in Canton, New York.

      John McClenahen’s essay “Incorporating America: Whitman in Context” was designated one of the five best works published in The Journal of Graduate Liberal Studies during the twelve-year editorship of R. Barry Leavis of Rollins College. John McClenahen’s several journalism prizes include the coveted Jesse H. Neal Award. He also is the author of the commemorative poem “Upon 50 Years,” celebrating the fiftieth anniversary of the founding of Wolfson College Cambridge, and appearing in “The Wolfson Review.”

      John McClenahen received a B.A. (English with a minor in government) from St. Lawrence University, an M.A., (English) from Western Reserve University, and a Master of Arts in Liberal Studies from Georgetown University, where he also pursued doctoral studies. At St. Lawrence University, he was elected to academic honor societies in English and government and to Omicron Delta Kappa, the University’s highest undergraduate honor. John McClenahen was a participant in the 32nd Annual Wharton Seminars for Journalists at the Wharton School at the University of Pennsylvania in Philadelphia. During the Easter Term of the 1986 academic year, John McClenahen was the first American to hold a prestigious Press Fellowship at Wolfson College, Cambridge, in the United Kingdom.

      John McClenahen has served on the Editorial Board of Confluence: The Journal of Graduate Liberal Studies and was co-founder and first editor of Liberal Studies at Georgetown. He has been a volunteer researcher on the William Steinway Diary Project at the Smithsonian Institution, Washington, D.C., and has been an assistant professorial lecturer at The George Washington University in Washington, D.C.