Manufacturers Report Significant Improvement

Emerging optimism prevails in the manufacturing sector that the “Great Recession” is finally turning to recovery, according to the quarterly Manufacturers Alliance/MAPI Survey on the Business Outlook March 2010, a leading indicator for the industrial sector. The March 2010 composite index rose to 78 percent from 57 percent reported in the December 2009 report, representing the highest level since the June 2004 survey registered 80 percent, and marks the second straight quarter it has reached 50 percent or above.

Just one year ago the March 2009 index registered an historic low 21 percent.

“The sharp increase in the composite index, along with significant improvement in individual indexes, point to increased confidence that the manufacturing sector will continue to recover from the rapid decline that took hold in the fourth quarter of 2008 and continued through the first half of 2009,” said Donald A. Norman, Ph.D., MAPI Economist and survey coordinator. “It is important to recognize, however, that many of the individual indexes are based on year-over-year comparisons and the composite index measures the direction of change rather than the absolute strength of activity in manufacturing. Still, the extent of the increases clearly points to further expansion.”

While a variety of individual indexes are included in the survey, the business outlook index is a weighted sum of U.S. shipments, backlogs, inventories, and profit margin indexes. All 12 individual indexes showed improvement, including eight by double digits.

The quarterly orders index, based on forecasts for the first quarter of 2010 with the same quarter one year ago, rose to 85 percent from 42 percent in the previous survey. The profit margin index increased to 74 percent in March from 38 percent in the December report. The U.S. prospective shipments index, which reflects expectations for second quarter 2010 shipments compared with the second quarter of 2009, improved to 88 percent in the March survey compared to 59 percent in the December report.

The backlog orders index, which compares the first quarter 2010 backlog of orders with the backlog of orders one year earlier, rose to 63 percent from 36 percent in the December survey. An accumulation of backlogs usually occurs when new orders exceed shipments and thus indicates growing strength in manufacturing. The export orders index, which compares first quarter 2010 exports with those of first quarter 2009, increased to 76 percent in March from 47 percent in the December survey.

The non-U.S. prospective shipments index, which measures expectations for shipments abroad by foreign affiliates of U.S. firms in the second quarter of 2010 compared to the same quarter of 2009, jumped to 80 percent from 64 percent. The inventory index is based on a comparison of inventory levels in the first quarter of 2010 with those of one year prior. It increased to 23 percent in March from a near-record low of 8 percent in December. The increase in this index, however, suggests that inventory destocking may be coming to an end.

The annual orders index, based on a comparison of expected orders for all of 2010 with orders in 2009, was an impressive 94 percent in March compared to 80 percent in December.

The research and development (R&D) index reflects the insights of participants regarding R&D spending in 2010 compared to 2009. The R&D index was 70 percent, slightly above the 66 percent recorded in the previous survey.

The U.S. investment index, based on expectations of executives regarding capital investment in 2010, was 69 percent, up from 66 percent, indicating increased domestic investment this year. The non-U.S. investment index provides insight into expectations regarding capital expenditures abroad. The March 2010 index was 70 percent, a marginal improvement over the 68 percent recorded in December, implying that a significant number of respondent companies are anticipating capital spending growth outside the United States.

The capacity utilization index, based on the percentage of firms operating above 85 percent of capacity, improved to 9.8 percent in the current survey from 7 percent in the previous survey. This is still far below the long-term average utilization rate of 32 percent. This is the lone index showing that the manufacturing sector has yet to fully recover from the recession.

In a supplemental component of the survey, respondents were queried regarding the outlook for the growing federal deficit. A wide majority of the survey participants, 84 percent, expect the federal deficit to be significantly greater than the $752 billion the government is currently projecting in 2015. Sixty-one percent expect that rising federal debt will raise inflation by as much as 2 percentage points, and another 32 percent think it could rise by 2 to 4 percentage points.

More than 90 percent believe that the growing debt will raise interest rates by at least 2 percentage points. Finally, 56 percent of the respondents expect the dollar to fall by 5 percent to 15 percent from its current level over the next five years.

The survey reflects the views on current and future business conditions of 62 senior financial executives representing a broad range of manufacturing industries.

From Material Handling Industry of America

Get the free newsletter

Sign up for news, trends and equipment for sale in the lifting and rigging industry.
By signing up you agree to our Terms of Use and Privacy Policy. You may unsubscribe at any time.

Latest Products For Sale

Type Description
Lifting Products
1/4" x 800' per drum H.G. Proof Coil Chain Grade 28
Lifting Products
Master Links
3.5" Skookum Alloy Master Links
Lifting Products
Master Links
4" Grade 80 Import Master Links 157T WLL
Lifting Products
Chicago Hardware 3/4" X 18" Jaw & Jaw Galv. Turnbuckles
Lifting Products
8" Tong Line Sw. Eye RB WLL 3T

News & Articles