Manufacturing growth strong, but slowing

The manufacturing expansion should continue, but decelerate, through 2007, according to the Manufacturers Alliance/MAPI Quarterly Industrial Outlook, a report that analyzes 27 major industries. The Alliance expects some deceleration in manufacturing industrial production, retrenching somewhat from 4.
By Staff January 1, 2006

The manufacturing expansion should continue, but decelerate, through 2007, according to the Manufacturers Alliance/MAPI Quarterly Industrial Outlook, a report that analyzes 27 major industries.

The Alliance expects some deceleration in manufacturing industrial production, retrenching somewhat from 4.8% growth in 2004 and an anticipated 3.4% in 2005. The forecast indicates that manufacturing industrial production will increase 2.5% in 2006 before moderating to 2.2% growth in 2007.

“A high level of energy and commodity prices increases costs in the industrial sector and hurts U.S. competitiveness. The rising trade deficit and less inventory building also restrain the pace of overall manufacturing growth,” said Daniel J. Meckstroth, Manufacturers Alliance/MAPI Chief Economist and author of the analysis. “Furthermore, rising long-term interest rates will limit consumers’ ability to tap their home equity and continue driving growth in big-ticket consumer items like houses and motor vehicles. Most industries-consumer, equipment, materials and construction-will experience slower growth but the weight of these factors are not enough to slow growth, only the pace of growth.”

“Energy, medical, and high-tech industries are leading growth this year,” Meckstroth added. “The capital equipment markets are generally strong but decelerating.”

The report also offers economic forecasts for 24 of the 27 industries for 2006 and 2007, and a longer term forecast through 2010 for these same industries.

Two industries are expected to enjoy double-digit growth in 2006 — mining and oil and gas field machinery should rise 49% with a profit incentive to expand due in part to the high levels of petroleum and metal prices and computer equipment by 13%. Similar growth in both industries is expected for 2007.