U.S. Manufacturing to grow slowly in 2016 | Automation.com

U.S. Manufacturing to grow slowly in 2016

March 17, 2016 - The MAPI Foundation released its latest U.S. Industrial Outlook, a quarterly analysis of 27 major industries, which found that manufacturing industrial production was unchanged from the third to the fourth quarter of 2015. The analysis indicates that such factors as high inventories, a strong dollar, falling commodity prices, and risk aversion have not dissipated and are the cause of this slow growth. The MAPI Foundation is the research affiliate of the Manufacturers Alliance for Productivity and Innovation.

The sector's erratic pattern of surges and declines isn't providing a solid footing for expansion, with only 1.1% production growth expected this year, as forecast by MAPI Foundation Chief Economist Dan Meckstroth, Ph.D., author of the report. Meckstroth revised his forecast for 2016 to show slightly lower GDP growth in the overall economy, but much lower growth in manufacturing.

"Strong employment growth amid little inflation boosts consumer income and spending," says Meckstroth. "Motor vehicle and housing supply chains are the driving force offsetting the deep recession in mining and energy capital spending and the pervasive drag of a strong dollar."

Other findings include:

Strong domestic demand is buffering the overall economy, which is also benefiting from steady growth in jobs and strong growth in the motor vehicle and housing supply chains.

Manufacturing is facing a number of challenges, including high inventories, collapsing oil prices, an unwillingness to invest, and an appreciating dollar that makes exports more expensive to foreign buyers.

The sector will experience almost no production growth in the first half of 2016 but should accelerate to a 3% annual rate in the second half. Meckstroth predicts that manufacturing will not reach its pre-recession production level until the third quarter of 2017.

In his cyclical analysis of manufacturing industries, Meckstroth finds that the housing supply chain will ramp up for three more years, motor vehicles' growth streak will continue through 2017, and demographics and the ACA will drive demand for medical care. Total machinery production will decline this year, as will mining and drill equipment production.

The report also offers specific economic forecasts for 23 of the 27 industries. The MAPI Foundation anticipates that 13 will show gains in 2016, 8 will decline, and 2 will remain flat. The outlook improves for 2017, with growth expected in 19 industries, led by housing starts at 16%.

Non-high-tech manufacturing production (which accounts for 95% of the total) is anticipated to rise by 1.0% in 2016, 2.4% in 2017, and 2.2% in 2018. High-tech industrial production (computers and electronic products) is projected to expand by 2.3% in 2016, 3.1% in 2017, and 5.3% in 2018.

Meckstroth reported that 6 industries are in the accelerating growth (recovery) phase of the business cycle, 10 are in the decelerating growth (expansion) phase, 10 are in the accelerating decline (either early recession or mid-recession) phase, and 1 is in the decelerating decline (late recession or very mild recession) phase.

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