Positive signs come from manufacturing sector

A composite business index above 50 indicates that overall manufacturing activity is expected to increase over the next three months. The survey is consistent with many economic forecasts that predict solid growth in U.S. Gross Domestic Product in the second half of 2003. It should be noted that the index measures the direction of change rather than the strength of activity in manufacturing. Still, nine of 10 individual indexes showed improvement.

The orders index that compares new orders for the third quarter of 2003 with the same quarter one year ago rose from 53% in June to 69% in September. The annual orders index, based on a comparison of expected orders for all of 2004 with orders in 2003, increased from 74% in June to 88% in September. The prospective shipments index, based on a comparison of prospective shipments in the third quarter of 2003 with the same quarter last year, rose from 70 to 80%. The backlogs index, comparing current backlogs with backlogs one year earlier, rose from 56% in June to 69% in September. The export index increased from 56% in June to 69% in September, the investment index rose from 54% to 64%, reaching its highest level since June 2000, and the research and development index improved from 55% to 66%. The inventory index fell from 42% to 33%, another positive sign indicating that inventories in the manufacturing sector are lower than a year ago. It is reasonable to expect an expansion in production to maintain and rebuild inventories.