U.S. manufacturing will leverage solid first quarter momentum to a significant growth increase in 2012, according to the quarterly Manufacturers Alliance for Productivity and Innovation (MAPI) U.S. Industrial Outlook (EO-108), a report that analyzes 27 major industries.
Manufacturing will continue to grow at a faster pace than the general economy in 2012, thanks in part to a scorching 10 percent annual rate in the first quarter of the year; it will decelerate to an average of 3 percent the remainder of the year.
“There is pent-up demand for consumer durable goods, particularly for motor vehicles, firms are profitable and have pent-up demand of their own for replacing traditional and high-tech business equipment, and there is strong growth from emerging economies for equipment to build their infrastructure,” said Daniel J. Meckstroth, Ph.D., MAPI Chief Economist and author of the analysis. “One negative is that the recession in Europe will have the effect of canceling out any net benefit from trade this year.”
The positive news for manufacturing is also tempered by anticipated slow growth in the overall economy.
“We forecast that GDP growth will increase at annual rates of 2.1 percent over the next five quarters,” Meckstroth said. “These growth rates are categorized as a relatively modest pace and well below what would be considered normal for an expansion following a severe recession. Consumers are deleveraging and are reducing debt and therefore can only increase spending commensurate with employment and wage growth.”
The report offers economic forecasts for 24 of the 27 industries. MAPI anticipates that 18 of these will show gains in 2012, 3 will remain flat, and 3 will decline. The engine, turbine, and power transmission equipment sector will grow by 32 percent and housing starts will see a 22 percent increase. Broad-based advances should occur in 2013 with growth likely in 23 of 24 industries, led by housing starts at 35 percent. Public works construction is the lone industry expected to decline in 2013, by 2 percent.
MAPI forecasts that industrial production will increase 5.2 percent in 2012, up from 4 percent in the March report, and 3.3 percent in 2013, down from 3.5 percent in the previous forecast. Manufacturing production should outperform GDP growth, which MAPI estimates will be 2.2 percent in both 2012 and 2013.
According to the report, non-high-tech manufacturing production (which accounts for 90 percent of the total) is anticipated to increase 5.5 percent in 2012 and 3.2 percent in 2013. High-tech industrial production (computers and electronic products) is projected to expand by 5.3 percent in 2012 and show 7.7 percent growth in 2013.
Eighteen of the 27 industries MAPI monitors had inflation-adjusted new orders or production above the level of one year ago (the same as reported in MAPI’s March 2012 report), eight declined, and one was flat. Engine, turbine, and power transmission equipment grew by 36 percent in the three months ending April 2012 compared to the same period one year earlier, while housing starts improved by 28 percent in the same time frame.
The largest drop came in domestic electronic computers, which declined by 12 percent.
Meckstroth reported that 8 industries are in the accelerating growth (recovery) phase of the business cycle; 10 are in the decelerating growth (expansion) phase; 7 are in the accelerating decline (either early recession or mid-recession) phase; and 2 are in the decelerating decline (late recession or very mild recession) phase of the cycle.
MAPI Forecast for Manufacturing Production
(Annual percent change)
Computer & Electronic Products