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MAPI Business Outlook: A Sense of Optimism for Manufacturers
Oct 17, 2013
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Improvement in a number of indexes suggest optimism for the manufacturing sector in the coming three to six months, according to the quarterly MAPI Business Outlook.

The survey's composite index is designed to be a leading indicator for the manufacturing sector. The September 2013 composite index was at 66, up from 58 in the June survey. It was the third consecutive quarterly advance and put the index at its highest level since December 2011, when it also stood at 66.

The index has been above the threshold level of 50 for 16 quarters, indicating ongoing expansion.

"Most indexes improved in September, and several rose significantly," said Donald A. Norman, Ph.D., MAPI senior economist and survey coordinator. "In particular, the large increase in the Composite Index and the jump in the U.S. Prospective Shipments and the Backlog Orders indexes point to an increased pace of manufacturing activity in the fourth quarter."

The Composite Business Outlook Index is based on a weighted sum of the Prospective U.S. Shipments, Backlog Orders, Inventory, and Profit Margin Indexes. The views of 51 senior financial executives, representing a range of manufacturing industries, are distilled into 13 individual indexes split between current business conditions and forward-looking prospects.

Current Business Condition Indexes

* Current Orders Index: This index is a comparison of orders in third quarter 2013 with those in the same quarter a year ago. This index was at 70, up from 53 in the previous report.
* Export Orders Index: This index examines the same time frame as the Current Orders Index, was 61, up from 45.
* Profit Margin Index: 68 in September, up from 56 in June.
* Capacity Utilization Index: this index measures the share of firms operating above 85% of capacity. The index was 30.0% in September, up from 21.2% in June. Its long-term average is 32.0%.
* Backlog Orders Index: This index compares expected third quarter 2013 backlog of orders with those of a year earlier the index was at 59, up from 54.
* Inventory Index: This index is based on a comparison of inventory levels expected in third quarter 2013 with those in third quarter 2012. The index dropped to 49 in September, from 51 in June. MAPI said this suggests companies are neither drawing down nor building inventories.

Forward Looking Indexes

* Prospective U.S. Shipments Index: This index reflects expectations for fourth quarter 2013 shipments compared with fourth quarter of 2012. This index was 76 in September, up from 67 in June.
* Prospective Non-U.S. Shipments Index: This index measures expectations for shipments abroad by foreign affiliates of U.S. firms for the fourth quarter 2013 shipments compared with fourth quarter of 2012. The index was at 70, up from 60 in the June survey.
* Annual Orders Index: This index is based on a comparison of expected orders for all of 2014 with orders in 2013. The index was at 81 in September, up from 64 in June.
* Interest Rate Expectations Index: This index was at 71, down from 81, which indicates that fewer respondents believe that longer-term interest rates will rise by the end of the fourth quarter of 2013.
* U.S. Investment Index: This index is based on executives' expectations regarding domestic capital investment for 2014 compared to 2013. The index was 53 in September, down from 65 in June.
* Non-U.S. Investment Index: The index was at 54 in the current report, from 53 in June.
* Research and Development Spending Index: This index was 66 in September, down from 73 in June. This index compared expected spending for the years 2013 and 2014.

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