Manufacturing Activity Index Sets Third Consecutive Record

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Manufacturing Activity Index Sets Third Consecutive Record

Data show 'real and robust' recovery, says Manufacturers Alliance.

By John S. McClenahen

In contrast to last week's data from the Institute for Supply Management, which showed the heady pace of U.S. manufacturing's recovery from the 2001 recession slowing a bit in June, the latest composite index of future business activity compiled by the Manufacturers Alliance/MAPI is at a record level.

The Arlington, Va.-based alliance's June quarterly figure stands at 80, the highest figure in the index's 32-year history and the third consecutive quarterly record number. It indicates that U.S. manufacturing output is expected to increase during the next three to six months. The previous record was March's figure of 78.

"The rise in this [composite] index, along with the strength shown by all the individual indexes [in the most recent survey], indicates that the expansion of manufacturing activity is real and robust," says Donald A. Norman, the economist who oversees the business and public policy research group's outlook survey and prepares the quarterly report. Norman, however, cautions that the alliance's composite index measures direction of change, rather than the absolute strength, of manufacturing activity.

The composite index, based on a survey of senior financial executives among Manufacturers Alliance/MAPI members, is a weighted sum of backlogs, inventories, profit margins and prospective shipments. An index figure above 50 indicates that the manufacturing sector of the U.S. economy generally is expanding; a number below 50 signals that it is contracting. Some 60 executives participated in the most recent survey, which was distributed at the beginning of June with responses due by June 25.

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