Manufacturing Should See Upward Trend in 2010, 2011 Says Industry Group

Manufacturers Alliance/MAPI forecasts manufacturing production will fall to 11% in 2009, before recovering to 5% growth in 2010 and to 6% growth in 2011.

The manufacturing sector enjoyed a resurgence in the third quarter of 2009 -- increasing production at an 8% annual rate -- but the general economic and industrial recovery will be hard-pressed to maintain that pace of growth, according to the Manufacturers Alliance/MAPI.

"Certainly the huge fiscal and monetary stimulus is compensating for the deleveraging of the American consumer and has helped some of the most depressed industries in the economy, like autos and housing, but the most important reason may be that the worst of the inventory destocking is ending," said Daniel J. Meckstroth, Ph.D., Chief Economist for the Manufacturers Alliance/MAPI.

"There are, however, cautionary flags that may dampen the recovery. For instance, job losses will continue through mid-2010; there is relatively little, if any, wage growth; credit is difficult to obtain without stellar credit scores; housing prices may fall further; and consumers are repaying debt and building a cash cushion."

On an annual basis, MAPI forecasts manufacturing production to fall 11% in 2009, before recovering to 5% growth in 2010 and to 6% growth in 2011.

Manufacturing industrial production, measured on a quarter-to-quarter basis, rebounded to the aforementioned 8% annual rate in the third quarter of 2009 after falling at a 9% annual rate in the second quarter.

Production in non-high-tech manufacturing mirrored overall production, dropped by an 8% annual rate in the third quarter of 2009. According to MAPI's quarterly economic forecast, non-high-tech manufacturing production is expected to decline 11% this year before increasing 2% in 2010 and 6% in 2011.

High-tech industrial production rose at a 5% annual rate in the third quarter of 2009. MAPI predicts it will decline 9% in 2009 before posting impressive 16% growth in 2010 and 18% growth in 2011.

There was a slight upward trend in the 2009 third quarter figures for the various components of the manufacturing economy. Medical equipment and supplies, aerospace products and parts, and public construction, each grew by 3%.

Meckstroth finds that five industries are in the accelerating growth (recovery) phase of the business cycle: communications equipment, aerospace products and parts, public works construction, basic chemicals, and pharmaceuticals and medicines; one industry, medical equipment and supplies, is in the decelerating growth (expansion) phase.

The manufacturing sector should begin to rebound in 2010, with growth in engines, turbines and power transmission equipment at 24%.

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