MAPI Business outlook survey climbs off the bottom
While the economic recovery in manufacturing is likely to be marked with numerous rough patches, signs are finally emerging that the sector can expect brighter days ahead, according to the quarterly Manufacturers Alliance/MAPI Survey on the Business Outlook for September 2009.
The September 2009 composite index rose to 38 from a near-historic low of 24 reported in the June 2009 report. It also represents the highest level in a year, or since an index of 48 was recorded in September 2008.
At 38, however, the index still indicates that overall manufacturing activity is expected to contract over the next three to six months, relative to the levels of one year ago when the economy was entering the severe recession. It should also be noted that the index measures the direction of change rather than the absolute strength of activity in manufacturing. The September 2009 index marks the fifth consecutive quarterly reading below 50, the demarcation point between growth and contraction.
"The rise in the composite index and the individual indexes, most of which reached record lows in the first or second quarters of 2009, point to the start of a recovery in the manufacturing sector," said Donald A. Norman, Ph.D., MAPI Economist and survey coordinator. "While many of the individual indexes remain at very low levels, the forward-looking indexes, like that for annual orders, are at much higher levels, indicating that manufacturing activity is expected to increase in 2010."
A supplemental component of the survey asked how senior financial executives view the strength of the recovery. Most respondents, 72.9%, say business is improving, but that the recovery has been weak or that activity has merely stopped retracting. Two-thirds, 67.2%, expect sales to slowly improve over the next 12 months. The employment situation, however, may prove problematic. On workforce levels, 70% have no plans to increase their workforce, 18.3% expect further reductions, and only 8.3% anticipate hiring new employees.