Manufacturers Alliance/MAPI Index at Lowest Points Since December 2001

Oct. 16, 2008
However executives expect the dollar to rise against the euro in 2009

In line with other recent economic indicators, the Manufacturers Alliance/MAPI Survey on the Business Outlook index is at the lowest point since a reading of 40 in December 2001. The September 2008 composite index registered a drop to 48 from the 50 reported in the June 2008 report.

"The trends in most of the individual indexes clearly reflect the recent slowdown in manufacturing activity and the forward-looking indexes point to a reduction in activity in the next three to six months," said Donald A. Norman, Ph.D., MAPI Economist and survey coordinator. "Events in the financial markets since mid-September will likely amplify the downturn in manufacturing activity in the United States and abroad."

Senior financial executives reported on their outlook for exports and the changing value of the dollar on foreign trade with more than three-fourths of the respondents, 76.9%, expect the dollar will rise from its current level against the Euro. Respondents were asked whether the fall in the dollar over the past year led their company to consider bringing some production that has moved offshore back to the United States. Over two-thirds, 67.2%, indicated they would not bring "offshored" production back, 19.7% indicated they would, and 13.1% said they would do so if the dollar were to continue to fall.

In reply to a related query about the higher prices for petroleum products and increased transportation costs, 73.2% indicated there are no plans to bring "offshored" production back to the U.S., 10.6% are considering doing so, and another 16.1% said that if energy prices continue rising, they would consider returning production to the United States.

The report showed that the inventory index fell to 58% in September 2008 from 69% in June 2008. The backlogs index decreased from 59% in the June survey to 49% in the September survey. Retrenchment in backlogs is another sign that overall manufacturing activity will fall over the next three to six months, says MAPI.

The capacity utilization index, based on the percentage of firms operating above 85% of capacity, fell to 37.6% in September 2008 from 41% in June 2008.

The quarterly orders index fell to 44% from 46%in the previous survey. The prospective U.S. shipments index, which reflects expectations for fourth quarter shipments, was 47%, down from 52% in June. Meanwhile, the profit margin index gave back two percentage points, falling to 53% in September compared to 55% in the June report.

The prospective non-U.S. shipments index, which measures expectations for anticipated shipments outside the U.S. in the fourth quarter of 2008 compared to the same quarter of 2007, dropped to a still solid 73% in September from 89% in June. The export orders index edged up to 76% in September from 73% in the June survey.

The U.S. investment index, which queried executives on their expectations regarding capital investment in 2009 compared to 2008, fell to 56% in September 2008 as compared to 62% a year ago. The non-U.S. investment index, which provides insight into expectations regarding capital expenditures abroad, was at 64% for September 2008, 13 points below the 77%in the June survey when respondents were asked to compare investment abroad for all of 2008 compared to 2007. The fall in this index indicates investment abroad will likely increase at a slower rate than it did in 2008.

The research and development (R&D) index asked respondents for their insights regarding R&D spending in 2009 compared to 2008. The R&D index fell to 71% as compared to 75% one year ago.

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