MAPI: Manufacturing Rebound Will Continue Into 2012

A new report says manufacturing growth will continue to outpace GDP growth, leaving firms with more cash to buy new equipment and expand business.

Arlington, VA. -- U.S. manufacturing industrial production rebounded in the third quarter of 2011, growing by 4 percent, and is extending into the final months of the year, according to the Manufacturers Alliance for Productivity and Innovation (MAPI) U.S. Industrial Outlook (ER-734), a quarterly report that analyzes 27 major industries.

“The growth is being led by the energy, transportation, and industrial equipment industries,” said Daniel J. Meckstroth, Ph.D., MAPI Chief Economist and author of the analysis. “We believe the continuing pickup in domestic auto production will also be a major driver of overall economic growth next year.

“We project that the pace of manufacturing growth will outperform overall GDP growth. Pent-up demand for postponed consumer durable goods continues to exist, particularly in motor vehicles,” he added. “In addition, firms are profitable and have the need to spend more for both traditional and high-tech business equipment, and reasonably strong growth in emerging economies is still driving U.S. exports.”

The report offers economic forecasts for 24 of the 27 industries. MAPI anticipates that 18 of the 24 industries will show gains in 2012, led by housing starts with 20 percent growth, albeit from severely depressed levels in 2011. Three industries will remain flat, and three will decline, including public construction the most, by 6 percent. Broad-based advances should occur in 2013 with growth likely in 23 of 24 industries, again led by housing starts at 32 percent. Public works construction is the lone industry expected to decline in 2013, by 2 percent.

Manufacturing industrial production, measured on a quarter-to-quarter basis, expanded at a 4 percent annual rate in the third quarter of 2011 compared to a flat second quarter, and will increase 4 percent as a whole in 2011. MAPI forecasts that manufacturing production will increase 3 percent in 2012 and advance by 4 percent in 2013. The 2012 forecast is unchanged from the September 2011 report. It should outperform GDP growth, which MAPI estimates will be 2.1 percent in 2012 and 3.3 percent in 2013.

According to the report, non-high-tech manufacturing production (which accounts for 90 percent of the total) is anticipated to increase 4 percent in 2011 before decelerating slightly to 3 percent in both 2012 and in 2013. High-tech industrial production (computers and electronic products), projected to expand by 8 percent in 2011, should increase by 6 percent in 2012 and show 10 percent growth in 2013.

Twenty of the 27 industries MAPI monitors had inflation-adjusted new orders or production above the level of one year ago, two more than reported in the previous quarter, and seven declined. Engine, turbine, and power transmission equipment grew by 28 percent in the three months ending October 2011 compared to the same period one year earlier, while mining and oil and gas field machinery production improved by 23 percent in the same time frame.

The largest drop came in public construction, which declined 12 percent.

Meckstroth reported that 7 industries are in the accelerating growth (recovery) phase of the business cycle; 14 industries are in the decelerating growth (expansion) phase; and 6 industries are in the accelerating decline (either early recession or mid-recession) phase; none are in the decelerating decline (late recession or very mild recession) phase of the cycle.

The current report also features MAPI’s annual five-year forecast. GDP is projected to grow at an average annual rate of 3.3 percent from 2014 to 2016, high-tech manufacturing at 14 percent, and non-high-tech manufacturing at 3 percent.

MAPI Forecast for Manufacturing Production -- Annual percent change

Computer & electronics products610
Non-high-tech manufacturing33
Source: MAPI  



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