By Steve Rice
The MAPI composite index saw double digit gains this quarter, up to 66 from 58 in the June survey. This marks the third consecutive quarter with an increase and brings the index to its highest point since the end of 2011, reflecting continued optimism of manufacturers upon news of continued QE from the Federal Reserve.
Many individual indices show strong momentum going into the end of the year. Current Orders, which compares expected orders in Q3 to that of one year ago, shot up to 70 from 53 in June. Export Orders, looking at export demand over the same time period, were also up to 61 from a meager 45 just last quarter marking its first expansionary move since the same period last year. Another notable improvement was made in Capacity Utilization, which grew from 21.2% to 30% over the quarter, although it still lies below its long term average of 32%. Inventories remain unchanged during this period as backlog of orders saw a five point jump, indicating that new orders are still outpacing shipments, a positive sign for production in the near-term. These improvements are optimistic signs of increasing domestic and international demand for manufactured goods as we near the end of the year.
Interest rate expectations took a turn for the worse, dropping from 81 to 71 on the individual index as businesses voice concern over potential shift in Fed policy regarding rates. The Fed has facilitated cheap financing by keeping rates low over recent years. Additionally, one unfortunate caveat regarding the MAPI survey is that the results were due on September 30th (before the government shutdown), and do not reflect real concerns about the impact on retailers if the government funding impasse is not resolved.