The 4Q '06 Composite Business Index published by the Manufacturers' Alliance/MAPI fell for the third straight quarter, to 54 from 64 in 3Q '06. The figure was the lowest since early 2002.

During the last ten years there has been a 69% correlation between the Composite Index Level and quarterly growth in US factory sector output.

The current orders index dropped sharply to 66, the lowest since 2002 but the 4Q export orders index rose and recouped declines in the prior two quarters. During the last ten years there has been a 59% correlation between the export orders index and quarterly growth in real US exports.

The profit margins index fell sharply to 62 versus an average 65 last year, its lowest level since 2Q '05.Capital spending intentions for the coming year, however, improved. During the last ten years there has been a 75% correlation between the capital spending index a q/q growth in business investment.

The survey of 60 senior financial executives representing a broad range of manufacturing industries reflects the views on current & future business conditions. The business outlook index is a weighted sum of shipments, backlogs, inventories, and profit margin indexes.

For the latest US Business Outlook from the MAPI click here.

U.S. Economic Outlook - Remarks by Michael H. Moskow, President and Chief Executive Officer, Federal Reserve Bank of Chicago are available here.