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First-quarter 2003 figures show that 14 of the 28 industries tracked in the report had inflation-adjusted new orders or production above the level of one year ago, down from 17 industries in fourth-quarter 2002.
Top industry performers recording double-digit growth were electronic computers, search and navigation instruments, industrial machinery, defense capital goods, photographic equipment, and communications equipment.
Daniel J. Meckstroth, Ph.D., Manufacturers Alliance/MAPI Chief Economist and author of the analysis, writes that 12 industries are in the accelerating growth (recovery) phase of the business cycle, four industries are in the decelerating growth (expansion) phase, two industrial sectors appear to be in the accelerating decline (early recession) phase, and 10 industries are in the decelerating decline (late recession or very mild recession) phase of the cycle.
"The long, drawn-out recession in manufacturing has created pent-up demand for capital goods investment," he said. "The proposed tax cut, expected lower interest rates, and falling value of the dollar should help the manufacturing industry pull out of the current double-dip recession in the second half of this year."
The report also examines the change in manufacturing employment.
Manufacturing employment peaked at 18.888 million jobs in pre-recession April 1998 but the sector has since lost 2.637 million jobs, a 14 percent reduction in five years. Manufacturing production peaked in June 2000, but fell 7.6 percent by December 2001. Following a brief rebound from January 2002 to July 2002, the manufacturing sector fell into a double-dip recession from which it has yet to recover. As of April 2003, manufacturing production remained 7.1 percent below its peak.
Clothing-related industries such as leather products and textiles have been some of the hardest hit. Although accounting for 8 percent of all manufacturing employment in April 1998, this sector suffered nearly 20 percent of manufacturing job losses in the last five years. Imports from low-wage countries have been a principle reason for the extraordinary job loss, according to Meckstroth.
Other examples can be found in electronics, primary metals, and heavy industries, which made up approximately one-fourth of manufacturing employment five years ago but have since seen the downturn account for 38 percent of the job losses. One reason, Meckstroth writes, is that foreign imports surged as foreign producers, facing declining domestic demand, aggressively targeted U.S. customers. A second major reason for the above-average job loss was that the booming economy in the late 1990s encouraged overbuilding of capital intensive industries in the United States and abroad that were served by those industries. The strong dollar also contributed to the loss of jobs.
"Falling prices of imported goods and lack of domestic demand give manufacturing firms no pricing power," Meckstroth said. "The only way firms could increase profits was to cut costs and increase productivity. Unfortunately, this has led to a massive reduction in headcount."
The full report, Analysis of Selected Industrial Indicators (ER-553e), can be obtained for $25 at ww.mapi.net.