Reason for Optimism
No doubt, the long-term outlook for manufacturing in America is much brighter than it was a few years back. But there are simply too many domestic and global challenges in the coming year for significant expansion in the factory sector. MAPI Chief Economist Dan Meckstroth has looked into his crystal ball and is projecting only 2% growth for the sector in 2013. Fortunately, looking at 2014 and beyond, he sees more substantial growth -- 3.2% in 2014 and an average of 3.6% from 2015 through 2017.
MAPI's current forecast is for 14 of the 24 industries that we track to grow this year. Aerospace will be the star of the show over the next few years, with projected growth at 16% in 2013 and 17% in 2014 -- Boeing (IW 500/16) deliveries jumped from 477 in 2011 to 601 in 2012. Much of this growth is due to the continued increase in airline traffic both domestically and internationally. Pent-up demand for motor vehicles should continue to provide significant growth in the automotive industry over the next two years, with projected 5% growth in 2013 and 4% in 2014.
Housing starts are expected to grow 28% this year and 32% next year. As a consequence, industries related to housing construction will see a bump, though most of the expansion won't be seen until 2014.
Equipment Upgrading
One more important factor will have an impact on manufacturing growth. There is clearly a need throughout the business community to replace worn and technologically obsolete machinery and equipment, but firms avoided taking the plunge until they had a better idea of what would happen with the economy this year. With the fiscal cliff avoided, manufacturing and the overall economy should be helped by an increase in business investment in equipment and software. MAPI projects equipment and software spending to increase 6.1% in 2013 and 7.4% in 2014. Industrial equipment spending is forecast to rise 5.2% in 2013 and 8.6% in 2014. Transportation equipment spending is projected to increase 6.2% in 2013 and 4% in 2014.
There is every reason to expect a resurgence in manufacturing in this country over the next five years. If our elected leaders can tackle the biggest policy challenges facing industry -- including an uncompetitive corporate tax code and an overly complex regulatory system -- then there's every reason to believe the renaissance is upon us. But there are too many imminent hurdles for our manufacturers to overcome for 2013 to be the year of a manufacturing renaissance.
Stephen Gold is president and CEO of Manufacturers Alliance for Productivity and Innovation (MAPI), an executive education and business research organization in Arlington, Va. (www.mapi.net).
