If the MAPI Foundation is correct, the next few years should show solid recovery in US manufacturing. “We anticipate manufacturing production will increase at a 2.1% annual rate in the third quarter of 2015 and by a 4.6% annual rate in the fourth,” said MAPI Foundation chief economist Daniel J Meckstroth.
The foundation is the research affiliate of the Manufacturers Alliance for Productivity and Innovation.
Despite the fact that overall manufacturing production growth is expected to end 2015 lower than previously expected, findings in the MAPI Foundation’s quarterly report US Industrial Outlook indicate that key drivers will allow for solid fourth-quarter advancement.
Mr Meckstroth reported that manufacturing industrial production increased only 0.7% in the first quarter largely due to a harsh winter in the US. In the second quarter it rose 1.2%. He expects it to finish the year with growth of 2.1%, but in 2016 increase by 3.4%, and the 3.1% in 2017.
“The forecast for manufacturing production growth in 2015 is lower than previously thought,” he said. “Three months ago, we expected growth of 2.5% in 2015. Now we forecast 2.1% growth for the year, following manufacturing production growth of 2.5% in 2014. We thought that manufacturing had fully recovered last year from the 2008-09 recession. Unfortunately, the revisions show manufacturing is still in the recovery phase of the economic cycle.”
Mr Meckstroth contended that many of the shocks that are slowing growth this year will be absorbed and reflected in 2015, but that growth drivers will continue into 2016 and 2017.
“With a return to normal winter weather, manufacturing production should get a boost,” he said. MAPI Foundation analysts point out that the growth for 2015 was originally forecast to be 2.5% and 4% for 2016. Growth figures for 2017 remain the same.
The MAPI Foundation anticipates overall GDP growth in the US will advance by 2.3% in 2015, 2.9% in 2016 and 2.7% in 2017, thanks to greater employment, which in turn creates income growth and a solid base of consumer spending. “Also, easy credit availability propels big-ticket spending for motor vehicles, residential housing and non-residential construction,” said Mr Meckstroth.
He believes the decline in investment in drilling for oil and natural gas and the appreciation of the US dollar have been holding back growth. “These will worsen the inflation-adjusted trade deficit,” he added.