Manufacturing’s recovery seen as ‘modest and fragile’

As signs continue to emerge that the U.S. economy is improving, a recovery from the worst recession since World War II is likely to be “modest and fragile”, according to a new report.

The Manufacturers Alliance/MAPI Quarterly Economic Forecast predicts that inflation-adjusted gross domestic product will decline 2.7% in 2009 before rebounding to 2.1% growth in 2010, and by 3.2% in 2011. The GDP forecast for 2009 in the current MAPI report is marginally better than the previously anticipated 2.9% decline for this year projected in the May 2009 release. By supplying major assumptions for the economy and running simulations through the IHS Global Insight Macroeconomic Model, the Alliance generates unique macroeconomic and industry forecasts.

“We believe the economy has bottomed out and will post a 1.9% increase at an annual rate in the third quarter of 2009 and 2.5% in the fourth quarter,” said Daniel J. Meckstroth, Manufacturers Alliance/MAPI Chief Economist. “The forecast for 2010 calls for a slight rebound in overall consumer spending based on slow personal income growth, and we look for continued improvement in the consumer sector in 2011.

“A swing from cutting inventory in 2009 to adding inventory in 2010 and 2011 has the impact of boosting production,” he added. “Economic momentum will be enhanced as pent up demand is unleashed, especially for new housing and motor vehicles as both of these industries are rebounding form several years of exceptionally low production.”

Manufacturing production growth is expected to decline 11.9% this year before rebounding to 3.2% growth in 2010 and 5.1% growth in 2011.

Production in non-high-tech industries is expected to decline by 11.8% in 2009 before increasing by 1.9% in 2010 and by 4.8% in 2011. The computers and electronics products sector, normally a consistent growth industry, will also see a drop-off this year, declining by 10.9%. High-tech industrial production, however, is expected to rebound to 8.9% growth in 2010 and by a healthy 15.4% growth in 2011. ASHRAE is another group seeing positive economic signs is According to a recent survey of more than 1,000 manufacturers, 70% of the respondents said that they expect the economy to be stronger in the first quarter of 2010.

This bodes well for the 2010 AHR Expo in Orlando this coming January as nearly 72% of respondents predicted that their customers will start buying more products in the first quarter.

In keeping with the optimistic outlook, 69% of the AHR Expo exhibitors believe their customers have been delaying purchases of new products and that this pent-up demand will result in more sales during the first quarter of 2010, while 24% of exhibitors expect sales to increase over 10% and nearly 30% expect sales increases of 5—10% in the first quarter of 2010. Close to 25% of respondents expect a smaller first quarter increase of between 1% and 4% while less than 5% see a decline in sales.

“The timing of the 2010 AHR Expo should be very beneficial to the HVAC/R industry,” said Clay Stevens, president of International Exposition Company, the show organizer, “insofar as it coincides with a significant revival in the demand for equipment, systems, components and services. We are expecting thousands and thousands of industry professionals from around the world to converge on Orlando in January to find the newest and most efficient products available anywhere.”

Stevens points out that the Southeast is one of fastest-growing areas of the country and a leading marketplace for the many green products and technologies that will be on display at the world’s largest exclusively HVAC/R exposition and conference.

The 2010 AHR Expo will take place Jan. 25—27, and will feature more than 1,600 exhibitors from around the world showcasing hundreds of innovative new products to over 45,000 attendees and exhibitor personnel from nearly 100 countries. So far, Show exhibitors have reserved over 310,000 net square feet of exhibit space.

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