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"Unfortunately there are no quick fixes, but time, the normal inventory cycle, and the repair of financial institutions have lessened the economic slide to a point where signs of stabilization have appeared," said Daniel J. Meckstroth, Ph.D., chief economist for the Manufacturers Alliance/MAPI and author of the analysis. "Recently housing starts have been increasing on a month-to-month basis, auto sales have picked up a bit, and the worst of inventory destocking is over. These and several other indicators point to a bottoming out in the recession."
Manufacturing industrial production, measured on a quarter-to-quarter basis, declined at a 10% annual rate in the second quarter of 2009 after falling at a 22% annual rate in the first quarter. The manufacturing recession continued to be "intense and widespread" in the second quarter, according to Meckstroth.
Only one of the 27 industries tracked in the report had inflation-adjusted new orders or production above the level of one year ago, one less than reported in the first quarter of 2009. Medical equipment and supplies grew by 4%, but the remaining 26 industries had production below the level of one year ago.
The largest drop came in steel production, which declined 58%. Drilling activity fell by 48%, housing starts by 47%, and industrial machinery by 45%.
Production in non-high-tech manufacturing dropped by an 11% annual rate in the second quarter of 2009. Non-high-tech manufacturing production is expected to decline 12% this year before increasing 2% in 2010 and 5% in 2011. High-tech industrial production fell at a 6% annual rate in the second quarter of 2009. MAPI predicts it will decline 11% in 2009 before posting 9% growth in 2010 and 15% growth in 2011.
No industries are in the accelerating growth (recovery) phase of the business cycle; one, the aforementioned medical equipment and supplies is in the decelerating growth (expansion) phase; 17 industries appear to be in the accelerating decline (either early recession or mid-recession) phase; and nine are in the decelerating decline (late recession or very mild recession) phase of the cycle.
The report also offers economic forecasts for 24 of the 27 industries for 2009, 2010, and 2011. Only the medical equipment and supplies industry is expected to grow this year, but two industries, aerospace products and parts, and public construction, are likely to remain flat. The manufacturing sector should begin to rebound in 2010, with MAPI forecasting 14 of 24 industries to show gains, led by housing starts with a 59% rebound from historically low levels. The turnaround should continue in 2011 with growth likely in all 24 industries, including seven by double digits, led by housing starts at 40% and industrial machinery at 25%.