According to the quarterly Manufacturers Alliance/MAPI Survey on the Business Outlook, the December 2002 index rose to 67, the highest level in five years.
A composite business index above 50 indicates that overall manufacturing activity is expected to increase over the next three months. The index measures the direction of change rather than the strength of activity in manufacturing.
Nearly all individual indexes showed improvement over the last quarter. In particular, the profit margins index, the capital investment index and the shipments index rose significantly.
The profit margins index jumped from 45% in September to 63% in December, the first time in two years it exceeded 50% which is the dividing line between rising and falling margins.
The capital spending index, a key indicator in economic recovery, rose to 57%, up from 45% in September, indicating that investment in the manufacturing sector in 2003 will exceed 2002.
The shipments index, based on prospective shipments in the first quarter of 2003, increased from 62% in September to 71% in December.
In another good sign, the inventory index fell from 24% in September to 22% in December. This points to a continuing inventory correction that eventually will necessitate an expansion of production as demand for manufactured products grow.
The only real concern in the survey was the orders index, which fell slightly from 61% in September to 60% in December. The orders index compares new orders for the fourth quarter of 2002 with the same quarter a year ago and is consistent with the slowdown in manufacturing activity in recent months.
