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Report: Manufacturing Sinking Into Negative Territory

Economic weakness to continue, with manufacturing production growth expected to decline 0.5 percent this year, according to Manufacturers Alliance/MAPI.

ARLINGTON, Va. -- The challenges facing the U.S. economy could last well into 2009, according to a report by the Manufacturers Alliance/MAPI.

MAPI expects inflation-adjusted gross domestic product (GDP) growth will slow to 1.6 percent in 2008 and decelerate to 1.3 percent in 2009.

"The Internal Revenue Service accelerate the payment of tax rebates this year under the economic stimulus plan, getting cash in consumers' hands earlier than expect," said Daniel J. Meckstroth, Manufacturers Alliance/MAPI Chief Economist. "The cash windfall is only temporary, and we expect a corresponding decline in spending in fourth quarter 2008 and into early 2009."

Manufacturing production growth is predicted to sink into negative territory in 2008, declining 0.5 percent following an already low 1.7 percent growth in 2007. It should return to a positive but weak 1.6 percent in 2009.

Production in non-high-tech industries will decline 1.8 percent this year and grow by 0.2 percent in 2009. High-tech industrial production is expected to rise 15.7 percent in 2008 and 14.7 percent in 2009.

Industrial equipment expenditures will decline by 0.4 percent this year and by 7.1 percent in 2009.

Export growth is expected to continue to outpace that of imports by a wide margin. Inflation-adjusted exports should rise 8.4 percent in 2008 and 7.3 percent in 2009. Imports are expected to declind by 1.4 percent this year and increase by 0.4 percent next year.

"Consumers are reducing discretionary purchase; these items tend to be imported," Meckstroth added. "At the same time, a weak dollar has improved the competitive position of U.S. exports of goods and services in the world marketplace. A declining dollar is beneficial and has made a major contribution in keeping the economy growing amid severe economic shocks."

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