MAPI: Return To Moderate Growth
Following a strong pace of production in the first quarter of 2013, manufacturing production eased in the second quarter but should accelerate growth, according to the quarterly Manufacturers Alliance for Productivity and Innovation U.S. Industrial Outlook, a report that analyzes 27 major industries.
Inflation-adjusted GDP increased at a 2.5 percent annual rate in the second quarter of 2013. Manufacturing declined at a 0.8 percent annual rate, a correction for the exceptionally strong pace of manufacturing production (5.2 percent annual rate) in the first quarter relative to meager growth in the overall economy.
MAPI forecasts that manufacturing production will increase 2.2 percent in 2013, a deceleration from the 3.1 percent forecast in June 2013. A pickup is likely in 2014, with growth anticipated to be 3.2 percent; that forecast is down from 3.6 percent in the previous report. Manufacturing production should outperform GDP growth, which MAPI estimates will be 1.6 percent in 2013 and 2.8 percent in 2014.
The report makes an initial forecast for manufacturing production for 2015, predicting 4.1 percent growth. MAPI’s most recent economic forecast anticipated GDP growing 3.4 percent in 2015.
“The outlook for 2014 and 2015 calls for close to a percentage point improvement in the growth rate each year,” said MAPI Chief Economist Daniel J. Meckstroth, Ph.D., author of the analysis. “Consumer spending growth has remained remarkably stable because of surprisingly robust employment growth in the sluggish economy; the payroll tax increase is in the rearview mirror, and spending will accelerate in 2014; and households have low debt burdens and their wealth position is rising.
“In addition, businesses are well positioned for making new investments in structures and equipment,” Meckstroth added. “What is needed is more confidence about the future. With the Eurozone coming out of recession, export activity should pick up and provide a boost to business sentiment.”
The report offers economic forecasts for 23 of the 27 industries. MAPI anticipates that 14 industries will show gains in 2013, 3 will remain flat, and 6 will decline. Housing starts should see a 20 percent increase. Both motor vehicles and parts production and household appliances are forecast to advance by 7 percent. The outlook improves in 2014, with growth likely in 22 of 23 industries, led by housing starts at 30 percent. Public works construction is the lone industry expected to decline in 2014, by 1 percent.
According to the report, non-high-tech manufacturing production (which accounts for 95 percent of the total) is anticipated to increase 2.1 percent in 2013 and 3.1 percent in 2014. High-tech industrial production (computers and electronic products) is projected to expand by 5.2 percent in 2013 and 7.6 percent in 2014.
Thirteen of the 27 industries MAPI monitors had inflation-adjusted new orders or production at or above the level of one year ago (the same as reported last quarter) and 14 declined. Housing starts grew by 21 percent in the three months ending July 2013 compared with the same period one year earlier. Material handling equipment grew 9 percent year-over-year through June 2013. The largest drop came in electronic computer shipments, which declined by 43 percent over the same time frame.
Meckstroth reported that 4 industries are in the accelerating growth (recovery) phase of the business cycle; 13 are in the decelerating growth (expansion) phase; 6 are in the accelerating decline (either early recession or mid-recession) phase; and 4 are in the decelerating decline (late recession or very mild recession) phase.
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