The outlook is positive for manufacturing production growth in the months and years ahead, according to reports including those from the Manufacturers Alliance for Productivity and Innovation (MAPI). Every three months, MAPI provides a detailed look at the health of the domestic manufacturing sector based on its analysis of 27 major industries.
Momentum in 2013
Manufacturing industrial production increased at a 1.0 percent annual rate during the third quarter 0f 2013, improving by an impressive 3.8 percent during October. This followed 4.9 percent growth in the first quarter of the year and a stagnant second quarter.
The year began with manufacturing production surging; however, the pace was not supported by overall economic performance. The industrial sector responded with an adjustment period to realign orders with the slow-growing domestic economy. Fortunately, economic progress accelerated in the third quarter and at the same time, the major export market improved. Manufacturing experienced three months of continuous growth from August through October.
Supporting this trend were highly positive readings in October and November from the Institute for Supply Management’s Purchasing Managers Index.
Here’s what 2013 looked like in terms of MAPI’s areas of focus:
- Overall manufacturing production grew at an annual rate of 2.1 percent.
- High-tech (computers and electronics) production grew at an annual rate of 4.4 percent.
- Non high-tech (traditional manufacturing) production grew at an annual rate of 2.0 percent. This is especially notable as this sector represents 95 percent of MAPI’s total.
The Outlook for 2014 and Beyond
Manufacturing growth in 2014 is estimated to be 3.2 percent. If MAPI’s estimate proves accurate, it will outpace growth in U.S. gross domestic product (GDP) which is estimated at 2.8 percent for the year. This includes:
- High-tech growth of 6.8 percent.
- Non high-tech growth of 3.0 percent.
The outlook is even more positive for 2015 with an overall growth rate forecast at 4.1 percent, followed by high-tech growth at 8.4 percent and non-high tech growth at 4.0 percent.
“Consumer spending has remained remarkably stable because of surprisingly robust employment growth in the sluggish economy; the payroll tax increase is in the rearview mirror; spending will accelerate in 2014, and households have low debt burdens and their wealth position is rising,” noted MAPI Chief Economist Daniel Meckstroth.
Other factors contributing to manufacturing growth are:
- A healthier investment landscape. Businesses are well positioned to make new investments in structures and equipment.
- Economic recovery in Europe. The Eurozone continues to emerge from recession. More robust export activity will boost production and business sentiment.
The intermediate-term outlook for 2016 through 2018 also looks promising. Here’s a snapshot:
- 2016: Manufacturing production is estimated to grow at an annual rate of 3.6 percent. High-tech production will see an 8.3 percent growth rate, while non-high tech production will improve by 3.5 percent.
- 2017: Overall production is forecast to improve by 2.9 percent. High-tech production will grow by 8.6 percent and non-high tech will rise 2.8 percent.
- 2018: Overall production will rise 3.1 percent, high-tech will grow by 9.8 percent, and non-high tech will achieve an increase of 2.8 percent.
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