Modest Growth in Manufacturing is Sustainable

In tandem with a slowing pace of recovery in the general economy, the manufacturing sector is decelerating, yet modest growth is sustainable, according to the Manufacturers Alliance/MAPI’s U.S. Industrial Outlook,a quarterly report that analyzes 27 major industries.

“Despite the recent deceleration in the pace of growth, the industrial recovery is stronger than the recovery in the general economy,” says Daniel Meckstroth, chief economist for the Manufacturers Alliance/MAPI and author of the analysis. “The pace of consumer spending is improving due to marginal employment growth and modest wage increases, and the prolonged downturn and sluggish recovery has created pent-up demand for some durable goods. In addition, business equipment and software spending is expected to be an important source of growth while exports should grow faster than imports.”

Manufacturing industrial production, measured on a quarter-to-quarter basis, grew at a 3% annual rate in the three months ending October 2010, after expanding at an 8% annual rate in the three months ending July 2010. MAPI forecasts that manufacturing production will increase 4% in 2011 and advance by 5% in 2012.

Production in non-high-tech manufacturing expanded at a 2% annual rate during the August-October 2010 period. According to the MAPI report, non-high-tech manufacturing production is expected to increase 3% in 2011 and 4% in 2012. High-tech industrial production rose at a 4% annual rate in the August-October 2010 time frame. MAPI anticipates this sector will post strong 12% growth in 2011 and 15% growth in 2012.

As shown in the report, 22 of the 27 industries MAPI monitors had inflation-adjusted new orders or production above the level of one year ago, the same number as reported in the previous three months ending in July 2010. Oil and gas well drilling grew by 55% in the three months ending in October 2010 compared to the previous three months, while domestic electronic computer production improved by 39% in the same window.

The largest drop came in private nonresidential construction, which declined 23%, while aerospace products and parts experienced a 4% decline.

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