Manufacturing Outlook: Slowing in 2007, Back Up In 2008

Consumer-oriented industries are weakest; energy business is strongest, according to Manufacturers Alliance/MAPI Quarterly Industrial Outlook.

Although the U.S. manufacturing sector did well in the early part of 2006, it slowed a bit in late 2006 and this will continue into the early months of 2007. But this slowdown should be short and manufacturing is projected to get stronger in 2008, according to according to the Manufacturers Alliance/MAPI Quarterly Industrial Outlook (ER-621e), a report that analyzes 27 major industries.

MAPI forecasts that overall manufacturing industrial production is expected to grow 4.8 percent in 2006, and will slow to 2.6 percent growth before rising to 3.4 percent growth in 2008.
The industrial sector is continuing its growth trends, as evidenced by third quarter 2006 figures that show 22 of the 27 industries tracked in the report had inflation-adjusted new orders or production above the level of a year ago.

Top industry performers in the third quarter, recording year-over-year double-digit growth, were mining and oil and gas field machinery (42 percent); communications equipment (27 percent); aerospace products and parts (25 percent); industrial machinery (24 percent); construction machinery (22 percent); oil and gas well drilling (16 percent); engine, turbine, and power equipment (15 percent); iron and steel products (14 percent); private non-residential construction (14 percent); semiconductors (13 percent); navigational, measuring, electromedical, and control instruments (13 percent); and electrical equipment (13 percent).

Consumer-oriented industries remain the weakest industrial sector due to the drop of housing activity by 19 percent in the third quarter which is sharply slowing other industries such as household appliances, wood products, paint, and furniture markets.

Twelve industries are in the accelerating growth (recovery) phase of the business cycle; nine are in the decelerating growth (expansion) phase; four industries seem to be in the accelerating decline (either early recession or mid-recession) phase; and two are in the decelerating decline (late recession or very mild recession) phase of the cycle, according to Daniel J. Meckstroth, Ph.D., Manufacturers Alliance/MAPI Chief Economist and author of the analysis.

“The industrial sector is undergoing a mid-cycle correction, not unlike the correction that occurred in 1995 during the 1990s cycle,” Meckstroth said.

Mining and oil and gas field machinery, at 11 percent, is the only industry in the MAPI forecast series projected to have double-digit growth in 2007. 

In 2008, computer equipment and aerospace and parts are both forecast to rise 12 percent from 8 percent and 9 percent, respectively, in 2007.

Two industries in the equipment sector are forecast to have negative change both in 2007 and in 2008.  Construction machinery is expected to decline by 1 percent in 2007 and by 5 percent in 2008, while engine, turbine, and power equipment is predicted to fall by 2 percent in 2007 and by 3 percent in 2008.