Industry Study Forecasts Continued Manufacturing Boom

January 25, 2006 — In its recent “2005 Survey on the Business Outlook,” the Manufacturers Alliance/MAPI, Arlington, Va., analyzed the views of 51 senior financial executives in member companies on current and future business conditions. The Alliance promotes the technological and economic progress of the United States through studies and seminars on changing economic, legal, and regulatory conditions affecting industry.

 

The Manufacturers Alliance/MAPI composite index of future business activity rose from 66 in September to 74 in December. The composite index is at a relatively high level and points to a continued expansion of manufacturing output over the next three to six months. All of the individual indexes — with one exception — improved in the survey. Following are some highlights revealed from the group's research.

 

• The orders index, which compared new orders in the fourth quarter of 2005 with the same quarter one year ago, rose from 81% in September to 84% in December.
• The annual orders index, based on a comparison of expected orders for all of 2006 with orders in 2005, increased from 83% in September to 91% in December. This indicates strong optimism that the vast majority of manufacturing industries will continue expanding in 2006.
• The export index rose from 68% in September to 74% in December.
• The prospective shipments index — based on a comparison of expected shipments in the first quarter of 2006 with the same quarter in 2005 — jumped from 79% in September to 90% in December.
• The backlog order index increased from 76% in September to 79% in December.
• The investment index jumped from 70% in September to 79% in December. Most companies expect investment in 2006 will rise above its 2005 level.
• The profits margin index also rose sharply to 74%. By comparison, in September, this index stood at 60%.
• The capacity utilization index was the only index to slip. In September, the percentage of companies operating at 85% of capacity or more was 48.3 \%. In December, this percentage fell to 42%. 

According to the report, the improvement in the composite and individual indexes in December comes on the heels of two years of increasing manufacturing production. While the indexes do not provide a forecast of the rate of expansion, it is clear that senior financial executives believe that the manufacturing sector will continue to expand in 2006. The results also show that various “red flags” — energy and commodity prices, higher interest rates, and auto and housing market trends — have yet to shake the optimism of most executives.

 

For more information, visit http://www.mapi.net.