Strong Manufacturing Production Predicted for 2015 2016

Strong Manufacturing Production Predicted for 2015, 2016

Nov. 24, 2014
Manufacturing production is expected to outpace GDP, with anticipated growth of 3.5% in 2015 and 3.9% in 2016. 

A combination of strong growth in jobs plus replacement demand for equipment from businesses will provide a stable base for overall economic growth, according to a new report released by The MAPI Foundation, the research affiliate of the Manufacturers Alliance for Productivity and Innovation.

The group released its quarterly economic forecast, predicting that inflation-adjusted gross domestic product will expand 2.8% in 2015 and 3.0% in 2016. Both are declines from the August report—of 3.0% and 3.3%, respectively.

Manufacturing production is expected to outpace GDP, with anticipated growth of 3.5% in 2015 (a decrease from 4.0% in the previous forecast) and 3.9% in 2016 (an increase from 3.6% in the August report).

The November 2014 report forecasts a five-year horizon in which GDP is expected to average 2.8% and manufacturing production to average 3.26% growth.

"We will have full employment in 18 months and manufacturing is already there," said MAPI Foundation Chief Economist Daniel J. Meckstroth.

“With the unemployment rate continuing to fall, the pain and suffering from the recession is dissipating. Why are businesses spending? Because consumers are spending. Also, the drop in energy prices is essentially a tax cut for us. Lower prices are a positive development.”

Production in non-high-tech manufacturing is expected to increase 3.8% in 2015 and 3.7% in 2016. High-tech manufacturing production, which accounts for approximately 5% of all manufacturing, is anticipated to grow 8.2% in 2015 and 10.0% in 2016. 

The forecast for inflation-adjusted investment in equipment is for growth of 6.9% in 2015 and 7.3% in 2016. Capital equipment spending in high-tech sectors will also rise. Inflation-adjusted expenditures for information processing equipment are anticipated to increase by double digits in each of the next two years—12.1% in 2015 and 12.3% in 2016.

The MAPI Foundation expects industrial equipment expenditures to advance 7.6% in 2015 and 3.6% in 2016. Conversely, the outlook for spending on transportation equipment is for decreases of 0.8% in 2015 and 0.4% in 2016. 

Spending on nonresidential structures is anticipated to improve by 2.6% in 2015 and 4.2% in 2016. Residential fixed investment is forecast to increase 10.2% in 2015 and 10.9% in 2016. Meckstroth anticipates 1.2 million housing starts in 2015 and 1.4 million in 2016.

Inflation-adjusted exports are anticipated to increase 3.3% in 2015 and 3.9% in 2016. Imports are expected to grow 3.6% in 2015 and 6.6% in 2016. The MAPI Foundation forecasts overall unemployment to average 5.6% in 2015 and 5.3% in 2016. 

The outlook is for an increase of 202,000 manufacturing jobs in 2015, a decrease from 315,000 in the August report. Meckstroth envisions 16,000 manufacturing jobs to be added in 2016, down from 86,000 in the previous forecast.

Over the five-year period from 2015 to 2019, the MAPI Foundation forecasts an average annual increase of 66,800 manufacturing jobs.

The refiners' acquisition cost per barrel of imported crude oil is expected to average $80.00 in 2015 and $80.60 in 2016. 

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