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MAPI Forecast: Construction To Bolster U.S. Manufacturing

MAPI expects the construction supply chain to be a primary driver of manufacturing growth over the next two years.

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Economists from the Manufacturers Alliance for Productivity and Innovation expect the construction supply chain to be a primary driver of manufacturing growth over the next two years.

The MAPI Foundation's latest quarterly analysis expects a stronger housing market and healthy non-residential construction to spur growth in related industrial sectors, including furniture, appliances and non-metallic minerals — a category that comprises glass, drywall, cement and other construction materials.

"You'll some of the fastest growth in some of these industries," MAPI Foundation Chief Economist Daniel Meckstroth said during a webcast this week.

Meckstroth said that construction in the manufacturing sector, in particular, is "booming" at the moment after rising 56 percent in the first half of 2015.

The growth stemmed from industries with high rates of capacity utilization, including food and beverage production, chemicals, plastics and rubber, non-metallic minerals and transportation equipment.

The decline in natural gas prices in the U.S. helped spark substantial capital investment in chemical manufacturing and plastics production, both of which use natural gas as a feedstock.

Investment in equipment, meanwhile, was kept in check by a decline in energy drilling equipment and agricultural machinery — the result of low crude and crop prices, respectively.

And despite the strong manufacturing construction numbers, the energy industry, along with reduced electricity-related projects, led to a weaker overall outlook for non-residential construction.

Meckstroth reiterated that low crude prices ultimately help the U.S. while the continued strength of the dollar will impede the nation's economic growth. Consumer spending, however, remains high due to continued job growth.

The MAPI Foundation last week reduced its growth forecasts for both U.S. GDP and manufacturing production in 2015 and 2016. Meckstroth said that manufacturing production is not expected to return to its pre-recession peak until the third quarter of next year.

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