Abstract Article- “US Manufacturers More Cautious About Future Growth”
By: John S. McClenahen
In October 2005 the latest trends indicate that while the manufacturing sector of the US continues to grow during the next three to six months, executives have become increasingly more cautious due to the rising energy prices. Although the energy prices are high, the prices are on a downward slope according to latest quarterly index of future business activity complied by the Manufacturers Alliance/MAPI, an Arlington VA.-based business and public policy research group.
From June the quarterly index was 68 and has gradually decreased to 66 in September with all four of its component indexes declining. The lowest the index went was 60 in June 2003 and the highest was 80 in June 2004. Although, the index is low, analysts remain optimistic. An index figure above 50 suggests that the overall manufacturing sector is expected to expand the next three months and any figure below 50 signals the sector is contracting. Analysts also predict manufacturing production will grow by 3.4% this year and by 2.8% in 2006.
The Alliance composite index of future business is a weighted sum of prospective shipments, inventories, and profit margins. The prospective shipment index, which compares expected quarter shipments with those the year before have fallen to 79% in September. Nonetheless, the shipment index is above the 50% range and will continue to increase in the 2005.
The Backlogs Index measures the extent to which new orders exceed shipments; slipped marginally to 76% in September from 78% in June. The most dramatic drop was from the inventory index, its consecutive quarterly decline fell to 63% in September from 71% in June. The last component of the index is the profit margin index is at 60% in September. The profit margin has experienced a steady decline for the past year.
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