Ford engine plant workers Carl Court, Getty Images

MAPI Foundation: Moderate Growth Will Accelerate Through 2018

The three-year forecast calls for 2.6% growth in 2016, 3.0% in 2017, and 2.8% in 2018 — all down slightly from the third-quarter outlook.

Manufacturing production has been flat during this fourth quarter, but the new year should start far stronger, according to the most recent U.S. Industrial Outlook quarterly report from the MAPI Foundation.

The research affiliate of the Manufacturers Alliance for Productivity and Innovation forecasts 3.3% growth in the first half of 2016, following a 3.3% annual rate increase in the third quarter of 2015. The three-year forecast calls for 2.6% growth in 2016, 3.0% in 2017, and 2.8% in 2018 — all down slightly from the third-quarter outlook.

“The growth driver for the outlook is continued strong employment growth, which creates new income growth and a solid base of consumer spending,” MAPI Foundation chief economist Daniel J. Meckstroth said. “Another impetus is easy credit availability, which propels big-ticket spending for motor vehicles, residential housing, and nonresidential construction.

The 2016 outlook received a boost from the absorption of some 2015 negative shocks, like the severe winter that altered transportation and shut down plants, Meckstroth said. “There will not be another West Coast port strike, and oil and gas prices will not drop by half again next year. And while the U.S. dollar may appreciate somewhat in 2016, it will not surge 15% again. The absence of these negative shocks provides some positive momentum for 2016.”

The outlook predicts 14 of the 23 industries included (among 27 total) will show gains next year, with five declining and four remaining flat. In 2017, 21 of those 23 industries are predicted to show gains, with just iron and steel, and paper production flat.

Manufacturing is still in the recovery phase of the economic cycle, Meckstroth wrote in the report, with industrial production needing to grow another 3% to reach pre-recession production levels that were achieved eight years ago, during the fourth quarter of 2007.

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