U.S. manufacturing didn’t glide like a skater through winter; repeated storms tripped up the nation’s factory output, flattening industrial production in the first quarter of 2014. But better times are ahead for the nation’s manufacturers, according to the Manufacturers Alliance for Productivity and Innovation (MAPI) quarterly U.S. Industrial Outlook.
MAPI forecasts manufacturing production growth of 3.2% in 2014, up from the 2.3% rate in 2013. And production growth will continue in 2015, predicts MAPI, to reach 4.0%, down slightly from the organization’s December 2013 forecast of 4.1%.
“Factors that were dragging down growth (mainly tax and other policy issues) were absorbed in 2013 and will not worsen over the next two years,” says MAPI Chief Economist Daniel J. Meckstroth, Ph.D. “Consumer-driven manufacturing growth will be relatively stable and supported by employment gains. Households have low debt burdens and their wealth is rising because of higher stock and home prices.
“Business investment–driven manufacturing is responsible for nearly all of the acceleration in production growth,” Meckstroth notes. “Firms have lots of cash, are profitable, and have relatively high utilization rates. Importantly, the two-year federal budget and debt ceiling agreement substantially reduce uncertainty. Now that the Eurozone has come out of recession and emerging markets seem more resilient, export activity should pick up and provide a boost to business sentiment.”
The MAPI report offers economic forecasts for 23 of the 27 industries. MAPI anticipates that 20 industries will show gains in 2014 and 3 will remain flat. Growth leaders include housing starts with a 22% increase, industrial machinery at 9%, and electric lighting equipment at 8%.
The outlook is even brighter in 2015, with growth likely in all 23 industries, led by housing starts at 30% and both electric lighting equipment and aerospace products and parts at 11%.
MAPI forecasts growth for two of the nation's largest manufacturing industries - automotive and aerospace. Motor vehicles and parts production will grow faster than the average for the manufacturing sector this year, MAPI predicts, and its growth rate will match the rest of manufacturing in 2015. Civilian aircraft production will show strong growth over the next several years, MAPI said, but the industry will be hampered by defense cuts.
According to the report, non-high-tech manufacturing production (which accounts for 95% of the total) is anticipated to increase 2.9% in 2014 and then 3.8% in 2015. High-tech industrial production (computers and electronic products) is projected to expand by 6.8% in 2014 and 7.2% in 2015.
From November 2013 through January 2014, just over half (14 of 27) industries MAPI monitors had inflation-adjusted new orders or production at or above the level of one year prior (four fewer than reported last quarter), while 10 declined and 3 were flat.
Earlier this month, NAM Chief Economist Chad Moutray predicted manufacturing production would grow at a 3.7% annual rate over the next two quarters, buoyed by consumer spending and a rising stock market.