In tandem with a slowing pace of recovery in the general economy, the manufacturing sector is decelerating, yet modest growth is sustainable, according to the Manufacturers Alliance/MAPI U.S. Industrial Outlook, a quarterly report that analyzes 27 major industries.

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By supplying major assumptions for the economy and running simulations through the IHS Global Insight Macroeconomic Model, the Alliance generates unique macroeconomic and industry forecasts.

\”Despite the recent deceleration in the pace of growth, the industrial recovery is stronger than the recovery in the general economy,\” said Daniel J. Meckstroth, Ph.D., chief economist for the Manufacturers Alliance/MAPI and author of the analysis. \”The pace of consumer spending is improving due to marginal employment growth and modest wage increases, and the prolonged downturn and sluggish recovery has created pent-up demand for some durable goods. In addition, business equipment and software spending is expected to be an important source of growth while exports should grow faster than imports.\”

Manufacturing industrial production, measured on a quarter-to-quarter basis, grew at a 3 percent annual rate in the three months ending October 2010, after expanding at an 8 percent annual rate in the three months ending July 2010. MAPI forecasts that manufacturing production will increase 4 percent in 2011 and advance by 5 percent in 2012.

Production in non-high-tech manufacturing expanded at a 2 percent annual rate during the August-October 2010 period. According to the MAPI report, non-high-tech manufacturing production is expected to increase 3 percent in 2011 and 4 percent in 2012. High-tech industrial production rose at a 4 percent annual rate in the August-October 2010 time frame. MAPI anticipates this sector will post strong 12 percent growth in 2011 and 15 percent growth in 2012.

As shown in the new report, 22 of the 27 industries MAPI monitors had inflation-adjusted new orders or production above the level of one year ago, the same number as reported in the previous three months ending in July 2010. Oil and gas well drilling grew by 55 percent in the three months ending in October 2010 compared to the previous three months, while domestic electronic computer production improved by 39 percent in the same window.

The largest drop came in private nonresidential construction, which declined 23 percent, while aerospace products and parts experienced a 4 percent decline.

Nine industries are in the accelerating growth (recovery) phase of the business cycle; 13 industries are in the decelerating growth (expansion) phase; four industries appear to be in the accelerating decline (either early recession or mid-recession) phase; and one, public works construction, is 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. MAPI forecasts that 19 of the 24 industries will show gains in 2011, led by housing starts with expected 34 percent growth, albeit from extremely depressed levels, followed by engine, turbine and power transmission equipment with 16 percent growth. The recovery should continue in 2012 with growth likely in 23 of 24 industries, including seven industries which are predicted to grow at double-digit rates, again led by housing starts at 53 percent, and engine, turbines and power transmission equipment at 18 percent. Public works construction is the only industry anticipated to decline, by 2 percent, in 2012.