Slower manufacturing production expected in 1998

Growth in the manufacturing sector will slow in 1998, but most industries will still record solid output gains. As the year progresses, inventories will accumulate a bit more as growth in new orders and export demand weakens. Most of the specific industry sectors that will grow at well-above-average rates are “high tech” in nature — computers, aircraft, electronic components, communication equipment, etc.

American manufacturing has enjoyed a full renaissance this decade, largely on the strength of the dramatic surge in capital investment since 1992. Long-term captial investments in productivity enhancing, efficiency-improving equipment and buildings have led to a sharp improvement in global competitiveness. And, for most sectors, the business investments that were made during the past 5 yr should allow productivity and production gains to continue unabated through the balance of this century.

Industrial production in manufacturing has grown solidly since the last recession ended in the spring of 1991. Annual growth for this cycle peaked in 1994, with an overall manufacturing output gain of 5.5%. Following more subdued growth in 1995 and 1996, preliminary estimates show that overall industrial production increased by about 5.1% in 1997. In 1998, production will continue to outpace the overall economy with a 3.4% gain.

Key manufacturing market indicators(Annual change, %*)

1997 1998

Industrial production 5.1 3.4

Shipments 5.5 4.1

Inventories 3.1 3.2

New orders 5.2 3.8

Employment 0.2 -0.9

*1997 estimated; 1998 forecasted by Reed Elsevier Business Economics

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