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Manufacturers Alliance: Industrial Growth Likely To Continue
June 8, 2005
The manufacturing expansion should continue in the next six months and sustain its growth through 2006, according to the Manufacturers Alliance/MAPI Quarterly Industrial Outlook, a report that analyzes 27 major industries.
In a sign of the broad-based strength in manufacturing, first quarter 2005 figures show that 22 of the 27 industries tracked in the report had inflation-adjusted new orders or production above the level of one year ago, down slightly from 24 industries experiencing growth in the fourth quarter of 2004, but nonetheless showing the staying power of the manufacturing sector. In general, industries that were in the early, strong growth phase of growth in the fourth quarter of last year decelerated in their pace of growth in the first quarter of 2005.
One of the highlights that the first quarter data revealed was at least moderate growth in six of the seven production equipment categories, a positive indicator of business confidence which foretells a likely increase in future production. Only heating, ventilation, air conditioning, and refrigeration equipment production was below 2004 levels, by 3 percent, and that category is expected to regain its growth momentum in 2005 before expanding by an additional 13 percent in 2006. Robust growth in most of these important industry groups is expected to extend through 2006.
Top industry performers in the first quarter, recording year-over-year double-digit growth, were material handling equipment (35 percent); electronic computers (26 percent); navigational, measuring, electromedical, and control instruments (17 percent); communications equipment (16 percent); oil and gas well drilling (13 percent); and mining and oil and gas field machinery (12 percent).
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; 13 are in the decelerating growth (expansion) phase; one, public works construction, appears to be in the accelerating decline (early recession) phase; and one, private nonresidential construction, is in the decelerating decline (late recession or very mild recession) phase of the cycle.
Manufacturing is continuing to grow, but at a slower rate," Meckstroth said. "Consumer goods and material industries are settling down to slower rates of growth. It is the capital equipment segment that seems to still be driving strong production gains."
The report also offers economic forecasts for 24 of the 27 industries for 2005 and 2006. Communications equipment is expected to enjoy double-digit growth in both 2005 and 2006, rising by 17 percent and 15 percent, respectively. Five industries are predicted to enjoy growth of 6 percent or better in each of the next two years: mining and oil field and gas field machinery (14 percent in 2005 and 7 percent in 2006); industrial machinery (7 percent/10 percent); medical equipment and supplies (10 percent/7 percent); metalworking machinery (7 percent/10 percent); and aircraft and parts (6 percent/9 percent).
No industries are forecast to have negative change in both 2005 and 2006, and only four are expected to decline in either of the next two years.
"Aerospace and nonresidential private construction are two big industries that are expected to change from decline last year to growth this year and next," Meckstroth added. The report is available for $25 to those who aren't members of MAPI here: http://www.mapi.net/html/abstract.cfm?pubid=280.