Manufacturing Business Outlook Shows Continuing Contraction

Dec. 21, 2004
However, survey suggests makings of manufacturing recovery exist, reports Manufacturers Alliance/MAPI.

Although U.S. manufacturing output is likely to continue to contract during the next three months, the makings of a business recovery for companies that make durable and nondurable goods appear to exist, indicates the latest Business Outlook Survey from the Manufacturers Alliance/MAPI, an Arlington, Va.-based research group. The quarterly index, which is a weighted sum of shipments, backlogs, inventories, and profit margins, was at the 40% mark in September, compared with 35% in June and an all-time low of 34% in March of this year. An index level below 50% signals a shrinking manufacturing sector; when the index is above 50% it is generally a sign that the manufacturing sector of the U.S. economy is expanding. "The fact that the index reached bottom in March 2001 and has since risen, even if only slightly, is a sign that the manufacturing sector is starting to recover," says Donald A. Norman, the economist who surveys a sample of senior financial officers at Manufacturers Alliance/MAPI member firms and calculates the index. "The attacks on Sept. 11 may delay the recovery, but the foundation for a recovery appears to be in place," The inventory component of the Business Outlook Survey index is now at 37%, some eight percentage points below its June 2001 mark of 45% and dramatically lower than this past March's 67%. This indicates that manufacturing inventories are continuing to decline. "In particular, the fact that an inventory correction is underway is a hopeful sign that the inventory overhang is being reduced. Once it is, manufacturing output should increase," says Norman.

Popular Sponsored Recommendations

Voice your opinion!

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