US manufacturing eases, overall commerce falls - surveys

14 October 2010 20:13  [Source: ICIS news]

WASHINGTON (ICIS)--US manufacturing activity declined slightly in the third quarter but should continue to expand, a key industry survey said on Thursday, while another report showed overall domestic commerce falling for a second straight month.

The Manufacturers Alliance said that the quarterly survey of its 500 major manufacturing member firms found that their top executives’ expectations for business performance over the next six months or more declined in the third quarter compared with the previous three-month period.

The alliance said that its composite index of key measures of manufacturing activity, sales and investments fell slightly to 77% for the quarter ended 30 September, down from the record-high 81% reported in the second quarter this year.

The composite index is made up of 12 subsidiary indicators, including capital investment plans, research and development (R&D) spending, new domestic orders, export orders and backlogged orders and profit expectations among others.

“Although some indexes based on year-over-year comparisons fell slightly, all remain at very high levels,” said Donald Norman, the Manufacturers Alliance economist and survey manager.

“The forward-looking indexes, based on expectations for annual orders, investment and R&D spending in the coming calendar year were all at high levels,” he said.

“Especially encouraging is the continued improvement in the capacity utilisation index,” Norman said, adding: “The pace of expansion may have slowed, but growth is expected to continue.”

However, a broadly-based real-time measure of overall domestic US commercial activity indicated that nationwide business fell by 0.5% in September, following a full 1% drop in August.

That measure, the Ceridian-UCLA Pulse of Commerce Index (PCI), draws on electronic reports of diesel fuel purchases by truck drivers across the country.

“By tracking the volume and location of fuel being purchased, the index closely monitors the over-the-road movement of raw materials, goods-in-process and finished goods to US factories, retailers and consumers,” according to Ceridian, which provides fuel charging services to trucking firms.

Ceridian, which compiles purchasing data with economists at the University of California at Los Angeles (UCLA), said that trucking fuel volumes for August and September together “produced the worst combined two-month decline since the recessionary months of January and February 2009”.

The PCI data for June and July were essentially flat, Ceridian said, meaning that along with the August and September declines there have been “four consecutive months of limited to no increases in over-the-road movement of produce, raw materials, goods-in-process and finished goods since the PCI peaked in May 2010”.

“The PCI tells us that inventory is stalled on the nation’s thoroughfares,” said Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast group.

“The good months of growth are now seemingly in our rear-view mirror,” Leamer said.

“Our economy’s loss of traction is alarming,” he added, noting that the data could foretell a coming decline in gross domestic production (GDP) and a new spike in unemployment.

He said that past relationships between the PCI and US GDP growth suggested that third quarter growth this year would slide to a weak 0.7% to 1.7%, a downward revision from last month’s PCI GDP forecast range of 1.5-2.5% for the quarter.

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By: Joe Kamalick
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