The Manufacturers Alliance for Productivity and Innovation (MAPI) said that its composite index of manufacturing activity eased from 61 in the second quarter to 56 in the third quarter. Interestingly, this index has declined every quarter since the second quarter of 2010, when it stood at just above 80. Even with this quarter’s decline, the measure remains over 50, suggesting continued expansion for the sector, albeit one that is growing more slowly.
Still, the lower levels of manufacturing activity reported in this survey are consistent with other measures noting recent weaknesses in the marketplace. The steepest decline was in the index for new orders, with sales dipping from 70 to 57. Included in this figure is exports, which have been pulled lower by slower global growth. The index for new export orders declined from 63 to 53, but one year ago, it was 80, illustrating the deterioration in growth for global trade.
Various other components were also weaker, including shipments, inventories, capacity utilization, and investment. Shipments of manufactured goods, both to the U.S. and abroad, are expected to grow at a slower pace in the fourth quarter. In short, manufacturing activity is anticipated to increase, but there is significant softness expected.
In a series of questions, respondents were somewhat split between what is the greater threat to the economy – the fiscal cliff or the challenges in Europe. The possibility that the sovereign debt crisis in Europe could impact the U.S. was cited by 42.4 percent as the single biggest threat, while the fiscal cliff was noted by 39 percent. The manufacturers who answered this survey are hopefully optimistic that the fiscal cliff can be averted, with 59.3 percent of them feeling that Congress will not allow it to happen. However, that suggests that the remaining 40.7 percent – a sizable percentage – feels otherwise.
Chad Moutray is chief economist, National Association of Manufacturers.