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Employment Gains Should Lead to Growth in 2016

Employment Gains Should Lead to Economic Growth in 2016

Dec. 15, 2015
Manufacturing growth is epected to be 3.3% growth in the first half of 2016.

Good news is around the corner as flat manufacturing production in the fourth quarter of 2015 should give way to 3.3% growth in the first half of 2016.

This is in part because of expected job gains, according to the MAPI Foundation, the research affiliate of the Manufacturers Alliance for Productivity and Innovation.

"The growth driver for the outlook is continued strong employment growth, which creates new income growth and a solid base of consumer spending," said  Foundation chief economist Daniel J. Meckstroth>, Ph.D. "Another impetus is easy credit availability, which propels big-ticket spending for motor vehicles, residential housing, and nonresidential construction.

Manufacturing industrial production rose at a 3.3% annual rate in the third quarter of 2015, a meager recovery from a flat first half of the year, and to which it is anticipated to return in the fourth quarter because of a predicted inventory runoff in November and December.

"The 2016 outlook is helped by the absorption of the negative shocks in 2015 such as the severe winter that disrupted transportation and shut down plants," he added. "There will not be another West Coast port strike and oil and gas prices will not drop by half again next year. And while the U.S. dollar may appreciate somewhat in 2016, it will not surge 15% again. The absence of these negative shocks provides some positive momentum for 2016."

The group forecasts manufacturing production growth of 2.6% in 2016, 3.0% in 2017, and 2.8% in 2018. The 2016 forecast is a decrease from 3.4% and the 2017 forecast is lower than the 3.1% in the September report. Overall GDP will advance by 2.9% in 2016, 2.7% in 2017, and 2.5% in 2018.

Looking towards 2017 growth will be led by mining, oil and gas field machinery at a growth rate of 14%. However iron and steel and paper production—are forecast to be flat.

Non-high-tech manufacturing production (which accounts for 95% of the total) is anticipated to increase 2.1% in 2016, 3.0% in 2017, and 2.6% in 2018. High-tech industrial production (computers and electronic products) is projected to expand by 4.3% in 2016, 5.7% in 2017, and 5.5% in 2018.

Looking toward 2010, MAPI predicts that both manufacturing production and GDP are predicted to average 2.6% annual growth from 2016 to 2020.