MAPI Predicts U.S. Production Will Drop 12% This Year But Grow 2% Next Year

May 27, 2009
Motor vehicles and parts production will grow 15% in 2010 after an expected decline of 32% this year.

U.S. manufacturing production continued to plummet in the first quarter of 2009 and global contagion continues, but a confluence of factors portend a modest rebound in 2010, according to a report released on May 27 by the Manufacturers Alliance/MAPI.

"Unfortunately, there are no quick fixes," said Daniel J. Meckstroth, Ph.D., Chief Economist for MAPI. "The deleveraging of the American consumer is ongoing and will continue for years. With heavy job loss, relatively low wage growth, tightened credit, falling housing prices, and declining stock wealth, consumers are cutting spending for big-ticket and discretionary items in order to build up depleted saving reserves. Business spending for capital goods is also in full retreat.

"Fortunately, we foresee an eventual end to the current recession in late 2009," he added. "Government stimulus, growing pent-up demand, lower commodity prices, particularly oil prices, lower mortgage rates, an end to the inventory runoff and declining imports will all contribute to a modest rebound in industrial production activity."

On an annual basis, MAPI forecasts manufacturing production to fall 12% in 2009 and grow 2% in 2010.

Manufacturing industrial production, measured on a quarter-to-quarter basis, declined at a 22% annual rate in first quarter 2009 after falling at an 18% annual rate in fourth quarter 2008.

Production in non-high-tech manufacturing dropped by a precipitous 22% annual rate in the first quarter of 2009. Non-high-tech manufacturing production is expected to mirror the overall production numbers, declining 12% this year before increasing 2% in 2010. High-tech industrial production also fell at a 22% annual rate in the first quarter of 2009. MAPI predicts it will decline 11% in 2009 and post 9% growth in 2010.

Steel production declined 61%. Material handling equipment fell by 56%, housing starts retrenched by 50%, motor vehicles and parts dropped by 41%, and semiconductors declined by 40%.

MAPI forecasts aerospace products and parts is predicted will grow by 5%, and communications equipment and medical equipment and supplies are each forecast to grow by 1% in 2009. Motor vehicles and parts production is finally anticipated to ramp up, growing by 15%, in 2010 after an expected decline of 32% this year.

Mining and oil and gas field machinery are expected to decline by 20% in 2009 and by 14% in 2010.

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