US manufacturing sector entering period of deceleration – group

12 July 2012 17:55  [Source: ICIS news]

WASHINGTON (ICIS)--The US manufacturing sector is dropping into a period of deceleration, a key survey reported on Thursday, a critical down-shift for an industry that had been a principal engine of the now slowing US economic recovery.

The Manufacturers Alliance for Productivity and Innovation (MAPI) said that its latest quarterly survey of manufacturing industry senior financial officers showed that the composite business index fell by four points to 61 in the second quarter from the 65 reading in the first quarter of this year.

The second-quarter decline in the index was the eighth straight quarterly downturn in this measure, marking a full two-year slide in manufacturers’ expectations for near-term prospects for their businesses.

The MAPI survey measures sentiment among top manufacturing financial executives in 13 categories – such as current orders, exports, profits and capacity utilisation – to create the composite business outlook index.

Donald Norman, MAPI senior economist and survey coordinator, noted that “each of the 13 [subsidiary] indexes showed some softening, including the six current business conditions indexes”.

“In contrast, four of the six current business condition indexes showed improvement in the March 2012 survey” of first quarter sentiment, he said.

Norman also pointed out that the survey’s export orders index, which compares second quarter 2012 exports with the same period in 2011, “fell significantly, to 63 in the current survey from 79 in March”.

He said that significant drop and other sharp declines in forward-looking sentiment among manufacturers were tied to “the euro zone recession and the slowing growth in China”.

The second-quarter survey results, said Norman, “point to a period of deceleration for manufacturing, heretofore a strong pillar in the US economic recovery”.

A separate measure of manufacturing showed that US production industries began to contract in June, the first downturn since the end of the recession.

Along with other recent data reports indicating that the already wobbly US recovery is slowing further, a period of deceleration in manufacturing bodes ill for the overall US economy.

Since the 2008-2009 recession ended in June 2009, US manufacturing industries have been the recovery’s principal driving force. Deceleration in that key sector will have a disproportionately broad impact on the economy in general.

US manufacturing industries also are a major downstream consumer sector for the country’s chemicals and resins producers.

MAPI's membership is made up of some 500 manufacturing companies, including a wide selection of chemicals firms.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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