Manufacturer's alliance/MAPI report: Growth slows, but some sectors stay strong in 1Q

The quarterly Manufacturers Alliance/MAPI report on the health of the manufacturing sector offered a mixed bag of news for the first quarter of 2005. While it sees slowing growth in the sector over the next two years, only four of 27 industries surveyed showed declining business activity in the first quarter.


The quarterly Manufacturers Alliance/MAPI report on the health of the manufacturing sector offered a mixed bag of news for the first quarter of 2005. While it sees slowing growth in the sector over the next two years, only four of 27 industries surveyed showed declining business activity in the first quarter.

"The cyclical analysis of 27 industries in the current report finds that most industries are past the peak growth rate that they will achieve in this cycle. This does not mean that there will not be further growth, only that the rate of growth will decelerate," the report stated. "We predict that manufacturing industrial production growth will decelerate from its 4.8% growth level last year to 3.4% in 2005 and 3.0% in 2006. "In general, industries that were in the peak phase of growth in the fourth quarter of last year decelerated their pace of growth in the first quarter."

There were still some strong areas of growth, as mining and oil and gas field machinery; oil and gas well drilling; communications equipment; navigational, measuring, electromedical, and control instruments; electronic computers; and material handling equipment all experienced double-digit growth in the first quarter, according to the Manufacturer's Alliance/MAPI report.

Data on equipment manufacturing was especially strong. "A positive sign that the manufacturing recovery has longevity is that six of the seven production equipment categories experienced growth in the first quarter of this year," the report noted. "Manufacturing industrial production is growing at a moderate pace and is driving the need to move materials around the factory floor and warehouse. Furthermore, large increases in trade flowing through the nation's ports, trucking terminals, and rail yards are an indication that material movement is increasing. First quarter inflation-adjusted material handling orders were 35% above order activity one year ago."

"Mining and oil field and gas field machinery production was up 12% in first quarter 2005 versus one year ago. World economic growth will decelerate this year, particularly in Japan and Europe, which should take some pressure off energy demand growth," according to the report. "China, the second largest oil-consuming country in the world, still is booming though and shows few signs of a promised slowdown to a soft landing in its manufacturing sector. With petroleum and metal prices at record highs, there is a profit incentive to expanding mining activity. Mining and oil field and gas field machinery production is making a strong recovery but is not booming as it has in the recent past.

"All told, mining and oil field and gas field machinery production is projected to increase 14% in 2005 and grow 7% in 2006," the report concluded.

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