The recovery has been slow, but manufacturing is almost back to its pre-recession level and could be poised to make additional gains, according to the most recent U.S. Economic and Manufacturing Outlook from the Manufacturers Alliance for Productivity and Innovation.
During MAPI’s quarterly economic forecast webinar, chief economist Daniel J. Meckstroth highlighted the sector’s improvements since 2008, when the Great Recession decimated production and shuttered plants across the country.
Meckstroth said the number of U.S. manufacturing plants, which declined 19 percent between 1998 and 2013 before flattening last year, now stands at 305,000 facilities. And the United States’ Purchasing Managers Index for October was 55.9, the highest rating in the world.
“Manufacturing in the U.S. is growing faster than many of our major competitors,” Meckstroth said. “It looks like manufacturing is stabilizing and … if we continue to grow faster we can at least maintain our share of the economy and not lose share like we have for the last 30 years.”
Manufacturing capacity utilization was 77 for September, just two points shy of its previous peak of 79 in December 2007. Petroleum was the best-performing sector at 85.
“It has taken seven years to recover manufacturing production, which fell 20 percent (during the recession),” Meckstroth said during the webinar. “The general economy only fell 4 percent and was fully recovered in the third quarter of 2011.”
The report wasn’t all rosy. The U.S. trade deficit is projected to increase more than $50 billion to $734 billion by year’s end, and geopolitical risks are lurking, including the conflict in Ukraine, the banking crisis in China, deflation in Europe and threats to the Middle East oil supply.
“We are now at a tipping point, with not enough major indicators for statistical confirmation,” Meckstroth said. “More domestic sourcing and rising export share would both go a long way toward realizing a revival.”
But more hints at a revival were revealed in MAPI’s full economic forecast. Manufacturing production is expected to outpace GDP, with anticipated growth of 3.5 percent in 2015 (a decrease from 4 percent in the previous forecast) and 3.9 percent in 2016 (an increase from 3.6 percent in the August report).
The November 2014 report forecasts a five-year horizon in which GDP is expected to average 2.8 percent and manufacturing production to average 3.3 percent growth.
“We will have full employment in 18 months and manufacturing is already there,” Meckstroth said. “With the unemployment rate continuing to fall, the pain and suffering from the recession is dissipating.”