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2014 Economy on an Upswing

April 3, 2014
Investment in capital equipment is a major growth driver.

Business investment-driven manufacturing will grow the economy by a percentage point in each of the next two years, according to the latest economic outlook from the Manufacturers Alliance for Productivity and Innovation (MAPI). More specifically, MAPI forecasts 3.2% manufacturing production growth in 2014 and a 4.0% increase in 2015.

Manufacturing industrial production increased at a 4.6% annual rate in the fourth quarter of 2013 but production fell sharply in January 2014 (down 0.8% from the previous month). The reduction in production activity in early 2014 originated in the fast growth in production late last year that created an inventory buildup, MAPI reports. The need to slow inventory accumulation and the depressing effect of severe winter weather account for the early 2014 production disappointment. MAPI believes, however, that these factors are temporary and do not change the outlook for stronger growth this year and next.

The surge in manufacturing investment is owed to the fact that firms have lots of cash, are profitable, and have relatively high utilization rates. At the same time, the two-year federal budget and debt ceiling agreement have substantially reduced uncertainty.

“Now that the Eurozone has come out of recession and emerging markets seem more resilient, export activity should pick up and provide a boost to business sentiment,” MAPI reports.

Where material handling equipment is concerned, shipments increased about 6% in 2013. In the three months ending January 2014, inflation-adjusted material handling orders were up 7% compared with one year ago.

The construction of buildings where elevators and escalators could be used is growing again. Construction of private and public buildings, adjusted for inflation, was up 3% in the three months ending January 2014 versus the same period one year ago.

Material handling equipment imports increased 6% while exports rose 1%; the small trade deficit turned more negative in the fourth quarter of 2013 from one year ago.

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