MAPI report: Manufacturing flat, reshoring revealed

The survey’s composite index, a leading indicator for the manufacturing sector, fell in December 2012 to 55 from 56 in the September 2012 survey. However, it remains above 50 which is the indicator of an expansion. A number below 50 indicates a contraction in business. Overall, six of the 13 indices decreased, including four of the six current business condition indices, and one remained flat.

The Capacity Utilization Index, which shows the percentage of companies operating above 85% of capacity, was up to 31.5% in December from 28.8% in September, near its long-term average of 32%.

The Backlog Orders Index, which compares 2012 backlog of orders with that of the same period one year ago, fell to 45 from 53 in the September report. Backlog among moldmakers is always a key as to how busy that industry segment will be and can indicate forthcoming molding work. Some moldmakers are reporting a drop in purchase orders during the last quarter of 2012, which means they entered 2013 with available machine time.

The Profit Margin Index was also down in December, to 59 from 67 in September. Also down was the Inventory Index, which slipped to 54 in December from 58 in September, which tends to indicate that OEMs are trimming their inventory in response to slowing growth, said the MAPI report.

Offshoring insights
Of the 42 firms that responded to the MAPI survey, seven with manufacturing operations located outside the United States have returned some of those operations back to the U.S. in the last 24 months. All of the activity was returned to existing plants. Of those that have returned, 67% have been relatively small in terms of investment and jobs. The primary reasons given for reshoring are a declining labor cost advantage abroad, rising shipping costs, and the desire to reduce supply chain uncertainty, reported MAPI.

MAPI estimates that Q4 2012 industrial growth will be about 1.5%, after a 10% annual rate in the first quarter of 2012. That decelerated to a nominal 1% in the second quarter and fell by 1% in the third quarter. MAPI forecasts that industrial production will increase 2% in 2013, a decrease from 2.3% in the previous forecast.

Daniel J. Meckstroth, MAPI Chief Economist and author of the Industrial Outlook report that analyzes 27 major industries, commented, “The outlook is for modest GDP growth throughout 2013, but it will not be until the second half of 2014 that the economy will grow at what could be called a moderate pace.” The report was released last month.