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MAPI: U.S. Manufacturing Will Remain Flat Near-Term

Survey shows overall manufacturing activity will remain flat over the next three to six months as orders fall and backlogs and inventories rise.

ARLINGTON, Va. -- Reflecting the downturn of the U.S. economy, manufacturing is expected to see significant issues in the near-term, according to a quarterly survey by the Manufacturers Alliance/MAPI.

The June 2008 composite index fell from 57 in March to 50 in the current June survey, indicating that overall manufacturing activity is expected to remain flat over the next three to six months.

The annual orders index, which is based on a comparison of expected orders for all of 2008 with orders in 2007, fell to 50 percent from 68 percent in March. The inventory index, based on inventory levels in the second quarter compared to those a year ago, rose to 69 percent from 54 percent, signaling a buildup in inventories.

The orders index, which compares new orders for the second quarter of 2008 with the same timeframe a year ago, fell to 46 percent from 58 percent. The prospective U.S. shipments index, which is based on expectations of anticipated shipments in the third quarter of 2008 compared with the same quarter last year, fell to 52 percent from 62 percent.

The profit margin index fell to 55 percent in June from 60 percent in March.

The prospective non-U.S. shipments index, which measures expectations for anticipated shipments outside the U.S., increased to 89 percent in June from 80 percent in March.

The backlogs index, which compares the second quarter 2008 backlog of orders with the backlog of orders a year earlier, increased from 55 percent to 59 percent. An accumulation of backlogs usually occurs when new orders exceed shipments.

The non-U.S. investment index rose two points to 77 percent.

The capacity utilization index rose to 41 percent from 38.3 percent in March. The export orders index edged up to 73 percent in June from 72 percent in March.

The U.S. investment index held steady at 62 percent, and the research and development (R&D) index was unchanged at 72 percent.

“This quarter’s results unequivocally reflect slowing activity in manufacturing and offer little prospect for an overall increase in activity over the next three months,” said Donald A. Norman, Ph.D., MAPI Economist and survey coordinator. “The news, however, is not all bad. The rise in indexes for backlogs, non-U.S. prospective shipments, and non-U.S. investment, coupled with the strength of the indexes for capacity utilization and exports, indicate that most of the manufacturing sector is holding up much better than it did in the last recession largely because non-domestic business continues to grow.”

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