A rising tide of positive factors bodes well for a rebound in the manufacturing sector, according to the quarterly Manufacturers Alliance for Productivity and Innovation U.S. Industrial Outlook.
Manufacturing industrial production increased at a 1% annual rate during the third quarter of 2013, but production has rapidly accelerated in the fourth quarter. Inflation-adjusted GDP increased at a 3.6% annual rate in the third quarter.
MAPI forecasts that manufacturing production will increase 3.1% in 2014.A solid pickup is likely in 2015, with growth anticipated to be 4.1%.
The group also forecasts that manufacturing production will average 3.2% from 2016 to 2018. Manufacturing should outperform GDP growth, which MAPI estimates will be 2.6% in 2014 and 3.2% in 2015.
“Consumer-driven manufacturing growth will be relatively stable and supported by surprisingly robust employment growth,” said MAPI chief economist Daniel J. Meckstroth, author of the analysis. “Business investment–driven manufacturing is responsible for the acceleration in production growth.Companies are well positioned for making new investments in structures and equipment. Firms have low debt, are profitable, and have relatively high utilization rates.
“What has been lacking is more certainty about the future,” Meckstroth added. “With the Eurozone coming out of recession, export activity should pick up and provide a boost to business sentiment. Hopefully, U.S. politicians have learned a lesson and will avoid flirting with disaster again. More certainty will promote investment activity.”
Other highlights of the report include a prediction that non-high-tech manufacturing production (which accounts for 95% of the total) is anticipated to increase 3% in 2014 and 4% in 2015.
High-tech industrial production (computers and electronic products) is projected to expand by 6.8% in 2014 and 8.4% in 2015.
Motor vehicles and parts and household appliances will likely grow 7%.