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Manufacturing to Grow 4% in 2016 Says Industry Group

June 11, 2015
For 2017, growth is predicted to be 3.1% for manufacturing production.

A rebound is in store for the manufacturing sector in 2016, according to the MAPI Foundation, the research affiliate of the Manufacturers Alliance for Productivity and Innovation.

While manufacturing industrial production fell at a 1.0% annual rate in the first quarter of 2015—after 3.5% growth in 2014—primarily due to the severe winter weather in January and February that disrupted construction, transportation, trad, and commercial activity, 2015 will see growth.

The group forecasts 2.5% growth in 2015 and 4% in 2016.  

Manufacturing will continue to grow faster than the overall economy, which will advance by 2.4% in 2015 and 3.0% in 2016, MAPI says.

For 2017, growth is predicted to be 3.1% for manufacturing production and 2.7% for GDP.

"A number of factors that drove growth last year have changed in 2015," said MAPI Foundation Chief Economist Daniel J. Meckstroth, Ph.D. "A sudden, rapid decline in oil and natural gas prices was good for energy users but caused problems in energy drilling, exploration, and the material supply chain; a sudden, rapid rise in the value of the dollar hurt our trade competitiveness; a large inventory buildup this past winter drove the inventory/sales ratio to unwanted highs; and finally, consumers are cautious and risk-averse.

"Many of these shocks that are slowing growth this year will be absorbed and will not hold down growth in 2016," he added. "Presuming we have a return to a 'normal winter' this year, manufacturing should get a boost."

The report offers economic forecasts for 23 of the 27 industries. The MAPI Foundation anticipates that 19 will show gains in 2015, 3 will decline, and 1—alumina and aluminum production—will remain flat. The top industry performers will be engine, turbine, and power transmission equipment and industrial machinery, each with anticipated annual growth of 11%.

The outlook is improved in 2016, with growth likely in 22 industries, led by housing starts at 19%. Mining and oil and gas field machinery is expected to plummet by 18%, as manageable oil prices will continue to discourage most shale drilling and, commensurately, drilling investment.

According to the report, non-high-tech manufacturing production (which accounts for 95% of the total) is anticipated to increase 2.4% in 2015, 3.2% in 2016, and 2.9% in 2017. High-tech industrial production (computers and electronic products) is projected to expand by 4.7% in 2015, 9.1% in 2016, and 8.3% in 2017.