The U.S. manufacturing outlook remains healthy despite indications of slowing expansion, a quarterly survey of 62 manufacturers said.
The Manufacturers Alliance/MAPI survey's composite index, a leading indicator, slipped to 75 percent from 77 percent in the previous report in September. However, it was the fifth consecutive quarter that the index was above 50, the dividing line between expansion and contraction. The index bottomed out at 21 in March 2009.
"The trends in the composite index and in the individual indexes are remarkable in that most were little changed from their September levels as they continue to remain at relatively high levels," said Donald A. Norman, MAPI cconomist and survey coordinator. "The takeaway from this quarter's survey is 'steady as she goes,' although the rise in the inventory index suggests that the pace of the expansion has slowed."
The survey results parallel a report Wednesday that business contacts in a survey by the Federal Reserve expressed a modestly optimistic outlook for 2011.
MAPI's business outlook index, a weighted sum of U.S. shipments, backlogs, inventories, and profit margin indexes, showed little change. The survey showed 33.3 percent of companies surveyed were operating above 85 percent of capacity. That was an increase from 28.1 percent in September and was above the long-term average utilization rate of 32 percent. The utilization index fell to a record low of 7 percent in December 2009.
The survey also showed slight year-to-year growth in order backlogs and increased expectations for capital investment, exports by foreign affiliates of U.S. firms, and research and development. Indexes of profit margin and export orders were down marginally.
Answering a supplemental component of the survey, 60 percent of respondents said their exports would be helped if the dollar were to fall by 10 percent and 60 percent indicated that profits would rise by some degree. Ninety-two percent said a fall in the value of the dollar would have little effect on investment spending, and all survey participants said it would have no effect on manufacturing location decisions.
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