The Economy

Manufacturing Business Indicator Moves Into Growth Territory

Dec. 21, 2004

Latest data suggest rebounding economy, but manufacturing recovery may not be uniformly strong, reports Manufacturers Alliance/MAPI.

John McClenahen

Consistent with other indicators that suggest U.S. manufacturing is on its way to recovery from recession, the latest quarterly index of future business activity from the Manufacturers Alliance/MAPI is signaling increased output during this calendar quarter. The business-policy research group's index for March 2002 reached 52%, the first time since December 2000 that it has been at -- or above -- the critical growth/no-growth 50% level. In December 2001, the index was at 40%. And in March 2001, the month that the National Bureau of Economic Research figures the recession began, the index was at a 29-year low of 34%. The future business activity index is a weighted measure of shipments, backlogs, inventories and profit margins -- and all those elements showed improvement between the alliance's previous read in December 2001 and March of this year, when its most recent economic survey of senior financial executives was conducted. The shipments index, a preview of the level of manufactured goods expected to be shipped during the next calendar quarter compared with the year-before mark, rose to 53% from 42%. The backlog index rose slightly to 34% from 31%. The profit margin index, while still low by historical standards, advanced to 39% from 21%. And the inventory index fell to 20% from 36%, bringing stocks of goods closer to the points where they'll need to be replenished. Additionally, the alliance's annual-order index, which comes out of the quarterly survey data but is not included in the index of future business activity, advanced to 62% in March from last December's 57%. In brief, that means more executives in March were optimistic about a 2002 manufacturing turnaround than were three months before. The March survey "provides solid evidence" that the manufacturing sector of the U.S. economy is starting to rebound, says Donald A. Norman, the Manufacturers Alliance/MAPI economist who coordinates the survey and crunches the numbers. However, although the manufacturing recovery in the near term appears to be solid, it may not be uniformly strong, he cautions. For example, the alliance's capital spending index dropped to 32% in March from 38% in December 2001, a sign that manufacturers "are not yet prepared to commit to long-term spending on new equipment and capacity," says Norman. Indeed, between December and March the percentage of companies that expected to increase capital expenditures this year from their 2001 outlays fell to 12% from 20%. Some 57 senior financial executives from a sample of Manufacturers Alliance/MAPI member companies responded to the group's most recent survey. The Arlington, Va.-based group's survey was sent out in early March, with responses due back by March 28, 2002.

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.