MAPI: Manufacturing Shows ‘Significant’ Improvement

Emerging optimism prevails in the manufacturing sector that ‘Great Recession’ is finally turning to recovery, quarterly Manufacturers Alliance/MAPI survey says.

ARLINGTON, Va. -- Emerging optimism prevails in the manufacturing sector that the “Great Recession” is finally turning to recovery, according to the quarterly Manufacturers Alliance/MAPI Survey on the Business Outlook. 

The March 2010 composite index rose to 78 percent from 57 percent reported in the December 2009 report, representing the highest level since the June 2004 survey registered 80 percent, and marks the second straight quarter it has reached 50 percent or above. 

Just one year ago the March 2009 index registered an historic low 21 percent.

“The sharp increase in the composite index, along with significant improvement in individual indexes, point to increased confidence that the manufacturing sector will continue to recover from the rapid decline that took hold in the fourth quarter of 2008 and continued through the first half of 2009,” said Donald A. Norman, Ph.D., MAPI Economist and survey coordinator.  “It is important to recognize, however, that many of the individual indexes are based on year-over-year comparisons and the composite index measures the direction of change rather than the absolute strength of activity in manufacturing. Still, the extent of the increases clearly points to further expansion.” 

While a variety of individual indexes are included in the survey, the business outlook index is a weighted sum of U.S. shipments, backlogs, inventories, and profit margin indexes. All 12 individual indexes showed improvement, including eight by double digits.

Five components showed impressive gains:

The quarterly orders index, based on forecasts for the first quarter of 2010 with the same quarter one year ago, rose to 85 percent from 42 percent in the previous survey.

The profit margin index increased to 74 percent in March from 38 percent in the December report. 

The U.S. prospective shipments index, which reflects expectations for second quarter 2010 shipments compared with the second quarter of 2009, improved to 88 percent in the March survey compared to 59 percent in the December report. 

The backlog orders index, which compares the first quarter 2010 backlog of orders with the backlog of orders one year earlier, rose to 63 percent from 36 percent in the December survey. An accumulation of backlogs usually occurs when new orders exceed shipments and thus indicates growing strength in manufacturing.

The export orders index, which compares first quarter 2010 exports with those of first quarter 2009, increased to 76 percent in March from 47 percent in the December survey. 

The survey reflects the views on current and future business conditions of 62 senior financial executives representing a broad range of manufacturing industries.