Manufacturing to Increase 5.5% this Year 4.6% Next Year

Manufacturers Alliance/MAPI predicts industrial machinery will grow 17% in 2012

The U.S. economy is now in an expansion phase, with the level of production exceeding the previous business cycle peak of fourth quarter 2007, according to the Manufacturers Alliance/MAPI U.S. Industrial Outlook.

"The industrial recovery is expected to accelerate in 2011," said Daniel J. Meckstroth, Ph.D., chief economist for the Manufacturers Alliance/MAPI and author of the analysis. "Consumer spending for durable goods is likely to grow rapidly thanks to the additional payroll tax cuts passed late last year. Business confidence surveys indicate improvement and a pickup in hiring, therefore employment growth and modest wage increases will generate additional income for purchases. In addition, exports will be another source of faster growth in manufacturing, and expensing for business equipment will particularly expand high-tech business investment."

Manufacturing industrial production, measured on a quarter-to-quarter basis, grew at a 4% annual rate in the fourth quarter of 2010, after expanding at a 4.3% annual rate in the third quarter. MAPI forecasts that manufacturing production will increase 5.5% in 2011 and advance by 4.6% in 2012.

Production in non-high-tech manufacturing expanded at a 3.7% annual rate during the fourth quarter of 2010. According to the MAPI report, non-high-tech manufacturing production is expected to increase 4% in 2011 and 4% in 2012. High-tech industrial production rose at a 9.1% annual rate in the fourth quarter of 2010. MAPI anticipates this sector will post strong 14% growth in 2011 and 15% growth in 2012.

As shown in the new report, 16 of the 27 industries MAPI monitors had inflation-adjusted new orders or production above the level of one year ago, six fewer than reported in the previous quarter. One industry, household appliances, had no change. Industrial machinery grew by 49% in the three months ending January 2011 compared to the previous three months, while oil and gas well drilling production improved by 37% in the same time frame.

The largest drop came in private nonresidential construction, which declined 15%, while housing starts experienced a 4% decline.

MAPI forecasts that mining and oil and gas field machinery will see an 18% growth, followed by industrial machinery at 17% growth. Engine, turbine, and power transmission equipment shoudl see at 19% increase.

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