Is Manufacturing Manufacturing's Best Customer?

July 17, 2012

Looking at the Federal Reserve Board's report that industrial production increased 0.4% in June, you have the immediate impression that manufacturing is continuing its heady upward path. After all, 15 of the 20 manufacturing sectors grew in June.

But Daniel J. Meckstroth, chief economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), cautions: “Industrial activity is on a seesaw pattern with an average that equals slow growth. Measuring quarter-to-quarter reveals that manufacturing production grew at only a 1.4% annual rate in the second quarter of 2012. All the growth in manufacturing production has been in durable goods as there is pent-up demand for motor vehicles and machinery and equipment from postponed replacement cycles. Nondurable goods manufacturing declined at a 3.4% annual rate in the second quarter.

“It is important to think of manufacturing in the context of a sluggish U.S. economy and struggling world economy,” Meckstroth says. “Consumers are income-constrained and lack the collateral to use credit to spend more than their incomes. When they spend more for new auto payments they have to spend less somewhere else. Export growth is difficult to sustain in light of the recession in Europe and slowing growth in China. The sweet spot in the outlook is business spending for factories and equipment. Less uncertainty about the fiscal cliff, regulation, and growth would certainly help business confidence in making these investments.”

About the Author

Steve Minter Blog | Executive Editor

Focus: Global Economy & International Trade

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An award-winning editor, Executive Editor Steve Minter covers global economic and international trade issues, tackling subject matter ranging from manufacturing trends, public policy and regulations in developed and emerging markets to global regulation and currency exchange rates. As well, he supervises content production of all IW editorial products including the magazine, IndustryWeek.com, research and informationproducts, and executive conferences. 

Before joining the IW staff, Steve was publisher and editorial director of Penton Media’s EHS Today, where he was instrumental in the development of the Champions of Safety and America’s Safest Companies recognition programs.

Steve received his B.A. in English from Oberlin College. He is married and has two children.

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