The Manufacturers Alliance for Productivity and Innovation (MAPI) announced that its composite index of manufacturing activity edged slightly lower from 67 in the third quarter of 2011 to 66 in the fourth quarter. Similar to the Institute for Supply Management’s surveys, readings over 50 suggest that the sector is expanding. Therefore, the senior financial executives from the manufacturing sector responding to this survey still suggest strong growth overall for the manufacturing industry, with slight easing in some of the numbers only reflecting a slightly lower growth rate. The index has grown now for nine consecutive quarters.
Looking at the various components of the index, each of them suggests strong growth moving forward, even as some of figures were lower than in the previous quarter. Illustrating the mixed nature of these results are shipments, which grew from 81 to 83 for the quarter, and new orders, which fell from 79 to 70. It is hard to get upset over either reading, despite the lower growth rate for new orders. Nonetheless, several indicators did mirror the easing observed in the new orders figure, including the level of exports, capital investments, profit margins and capacity utilization.
The survey asked a series of questions about uncertainties related to the European sovereign debt crisis. Almost all (97 percent) of the respondents felt that Europe would experience a recession in 2012, and 45 percent of them said that their exports to Europe have slowed as a result. Nonetheless, three-quarters of them anticipate no changes in the European strategies moving forward, at least at this time.
Overall, this survey continues to represent much stronger sentiment than many of its industry peers, and yet, other surveys also indicate an improved economic environment for manufacturers. Highlighting this, Donald Norman, a key MAPI economist responsible for this survey, says, “Barring a meltdown in the Eurozone, the U.S. manufacturing sector should continue growing at a moderate pace heading into 2012.”
Chad Moutray is chief economist, National Association of Manufacturers.