ARLINGTON, Va. — U.S. manufacturing will experience a rough 2008, due largely to the housing collapse. As a result, the economic landscape will be highly volatile in 2008 before rebounding in 2009, according to a Manufacturers Alliance/MAPI report.
Housing starts sank 24 percent in the third quarter of 2007 and are expected to drop another 28 percent in 2008, said Daniel Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI and author of the report.
In 2009, housing starts should rebound, rising 34 percent to 1.3 million units.
MAPI is forecasting a mild manufacturing recession next year. Production is expected to increase 1.9 percent in 2007. No growth is predicted for 2008, and there may be a slight decline in non-high tech industries. It will rebound in 2009, growing 2.6 percent.
Meckstroth blames five ‘economic shocks’ for the halt in industrial growth:
- a significantly worse housing start outlook
- the negative impacts of falling housing prices on consumer spending
- the credit crunch
- high gasoline and record high fuel oil prices
- the economy generating less job growth
Of the 27 industries the report tracks, 13 reported new orders or production above year-ago levels in the third quarter of 2007. Twelve reported production below year-ago levels and two remained flat.
The largest drop was in equipment industries, where six of seven subsectors declined year-over-year in the third quarter of 2007.
Communications equipment, electrical equipment, aerospace products and parts and private non-residential construction saw strong, double-digit year-over-year growth in the third quarter.
“The decline in the value of the U.S. dollar will act as a stabilizer to manufacturing,” Meckstroth concluded. “U.S. exports will increase at a rapid pace while import growth decelerates. The trade situation will cushion the industrial decline next year and boost growth in 2009.”