Industrial Production to Grow 4% in 2011, 3% in 2012

Manufacturers Alliance/MAPI says energy and medical related equipment as well as industrial-oriented machinery production continue growing at a fast pace.

Manufacturing industrial production, measured on a quarter-to-quarter basis, was relatively flat in the second quarter of 2011 after expanding at a 7% annual rate in the first quarter, according to the Manufacturers Alliance/MAPI Outlook released on Sept. 20.

MAPI forecasts that manufacturing production will increase 4% in 2011 and advance by 3% in 2012. The forecast is down from 6% and 4%, respectively, from MAPI's May 2011 report in response to the weak consumer sector and business concerns about sales prospects.

However, it should outperform GDP growth, which MAPI estimates will be 1.6% in 2011 and 2.1% in 2012.

"A number of shocks adversely affected the economy and the manufacturing sector in the first half of 2011," said Daniel J. Meckstroth, Ph.D., chief economist for the Manufacturers Alliance/MAPI."Abnormal events included severe winter weather and spring flooding, the Japanese tsunami's effect on the supply chain, high commodity prices (particularly food and oil), and a surge in home foreclosures. Fortunately, automakers are bumping up production schedules because of low inventories, and both food and oil prices are falling.

"In addition, energy and medical related goods and equipment as well as industrial-oriented machinery production continue growing at a fast pace," he added. "Business equipment production should be a driver of manufacturing growth in the second half of this year."

The report offers economic forecasts for 24 of the 27 industries. MAPI anticipates that 18 of the 24 industries will show gains in 2011, led by engine, turbine, and power transmission equipment with 23% growth. One industry, pharmaceuticals and medicine, will remain flat. Improvement should continue in 2012 with growth likely in 23 of 24 industries, led by housing starts at 17%, albeit from depressed levels. Public works construction is the only industry expected to decline, by 5%, in 2012.

Production in non-high-tech manufacturing showed no change from the first to second quarter of 2011. According to the MAPI report, non-high-tech manufacturing production (which accounts for 90% of the total) is expected to increase 4% in 2011 and 3% in 2012. High-tech industrial production rose at a 2% annual rate from the first quarter to the second quarter of 2011. MAPI anticipates this sector will increase by 9% in 2011 and show 11% growth in 2012.

Engine, turbine, and power transmission equipment grew by 29% in the three months ending July 2011 compared to the same period one year earlier, while mining and oil and gas field machinery production improved by 28% in the same time frame.

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