Manufacturers Alliance for Productivity and Innovation Archives - Shopfloor

MAPI: Manufacturing Activity Mixed, Cautious Optimism Looking Forward

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The Manufacturers Alliance for Productivity and Innovation (MAPI) said that its composite index of manufacturing activity fell slightly from 56 in third quarter of 2012 to 55 in the fourth quarter. As I have noted before, this index has declined every quarter since the second quarter of 2010, when it stood at just above 80. Overall, manufacturers continue to grow modestly – even with the lower figure – as the index remains above the threshold of 50 which signifies expansion for the sector.

It is clear from these data that sales within the manufacturing sector have been challenged, especially for international trade. The index for current new orders was unchanged at 57 between the third and fourth quarters, but this remains well-below the 70 observed in the second quarter. On the trade front, new export orders declined somewhat, down from 53 (slight expansion) to 49 (slight contraction). With slowing economies around the world, this figure is consistent with other reports of headwinds pertaining to growing exports.

The capacity utilization rates rose from 28.8 percent to 31.5 percent, suggesting some improvement, even as these rates remain sub-par. Other pieces of good news surround the forward-looking indices, with manufacturers responding to this survey cautiously optimistic about this year. Some growth is anticipated for shipments, orders, and investments. The pace of non-U.S. investment expectations pulled back one notch from 60 to 59, once again echoing some of the headwinds experienced offshore (but still representing increased investment overall).

In a series of special questions, respondents were asked about reshoring. Seventeen percent (or seven) of the companies said that they had brought some production back to existing facilities from elsewhere, with a few more stating their intention to do so this year. The primary reasons for doing so were labor and transportation costs as well as a re-evaluation of their supply chain. Among reasons cited for not choosing to reshore, the top ones provided were cheaper costs elsewhere, the U.S. tax code, and the desire to produce closer to foreign customers.

Chad Moutray is the chief economist, National Association of Manufacturers.