MAPI Outlook: Manufacturing Sector Expansion to Slow

Composite index decreases to 64 from 66 in January.

The U.S. manufacturing sector should continue its near-term growth but the pace of expansion will slow, according to the quarterly MAPI Foundation Business Outlook, a survey conducted by the MAPI Foundation, the research affiliate of the Manufacturers Alliance for Productivity and Innovation.

The survey’s composite index tracks the manufacturing sector. The April 2015 composite index slipped to 64 from 66 in the January 2015 survey, the third straight decline after six quarters of incremental improvement. Still, it marked the 22nd consecutive quarter the index has remained above the threshold of 50, the dividing line separating contraction and expansion.

The composite business outlook index is based on a weighted sum of the prospective U.S. shipments, backlog orders, inventory and profit margin indexes. In the report, the views of 53 senior financial executives representing a broad range of manufacturing industries are segmented into 12 individual indexes split between current business conditions and forward looking prospects. Of those 12 indexes, four increased and eight declined.

The capacity utilization index, which measures the percentage of firms operating above 85 percent of capacity, increased to 45.8 percent in April from 42.3 percent in January. This index, which tends to be somewhat volatile, is well above its long-term average of 32 percent.

The current orders index, which compares orders in the first quarter of 2015 with the first quarter of 2014, increased to 73 from 71 in the previous report.

The profit margin index slipped to 67 from 70 while the inventory index, which compares inventory levels for the first quarter of 2015 to the first quarter of 2014, declined to 57 from 62.

The export orders index, which compares anticipated exports in the first quarter of 2015 with those of one year prior, fell to 49 in April from 59 in January, and portends contraction in this area. The backlog orders index dropped to 59 from 68.

The U.S. investment index, based on executives’ expectations regarding domestic capital investment for 2015 compared with 2014, improved to 61 from 58 in the previous survey. Conversely, the non-U.S. investment index, which forecasts investment abroad, slowed to 54 in April from 62 in January.

The prospective U.S. shipments index, which reflects expectations for first quarter 2015 shipments compared with those in the first quarter of 2014, decreased to 74 from 77 in January. The prospective non-U.S. shipments index, which measures expectations for shipments abroad by foreign affiliates of U.S. firms for the same period, fell to 55 in April from 58 in the previous report. Both indexes, though, are still performing at high levels.

The research and development spending index, comparing anticipated spending in 2015 with 2014, advanced to 69 from 67, but the annual orders index dropped 10 points, to 72 from 82 in the previous report.

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