If there is one report that every MTI member should pay attention to, it’s this one. Each quarter the
Manufacturing Alliance for Productivity and Innovation releases its quarterly forecasts for the next 3 years for every major manufacturing sector. It is a must read to help you understand where the markets you serve are heading. Here is the summary of the report. To download the full 18 page report with charts and graphs by sector, log in to MTI’s members only area and click on the
MAPI Industry Sector Report in the “Resource Library Box" on the front page of the website.
REPORT EXECUTIVE SUMMARY
Manufacturing industrial production fell at a 1.0% annual rate in the first quarter of 2015—faster than the 0.7% pace of decline in the overall economy. Production activity fell sharply in January and February, primarily because of the severe winter weather across much of the nation. The record cold temperatures and snowfall disrupted construction, transportation, trade, and commercial activity, making the severe winter of 2015 a repeat performance of 2014. What is different this year is that manufacturing activity has not aggressively bounced back in the spring.
Manufacturing production fell 0.6% in January, dropped 0.2% in February, rebounded 0.3% in March, and was flat in April. The relatively slow rebound in economic activity following the weather-related downturn is symptomatic of less growth momentum this year. The West Coast dockworkers slowdown had a more disruptive impact the longer it remained unresolved, reducing exports and delaying the delivery of components to some manufacturers.
Importantly, several positive factors driving growth last year have since changed, lowering manufacturing growth potential for the year:
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The rapid declines in oil and natural gas prices were beneficial to energy users but caused a similarly rapid decline in investment in energy drilling, exploration, and the material supply chain.
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The sudden rise in the value of the dollar hurts our trade competitiveness. The U.S. economy is growing faster than most advanced economies and our central bank has ended quantitative easing and is talking about raising interest rates while other nations’ central banks are beginning quantitative easing. More U.S. spending goes to imports as our export growth slows, weakening domestic production growth.
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A large inventory buildup this winter drove the inventory to sales ratio to unwanted highs, contrasting with last year’s lean inventories. An inventory drawdown should subtract 1.1 percentage points from growth in the second quarter of 2015 versus adding 1.4 percentage points in the second quarter of 2014.
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Consumers are cautious and risk-averse. They used much of their windfall oil savings to pay down debt, muting the positive impact on the economy. The ramping up of housing starts is also below expectations.
The forecast for manufacturing production growth in 2015 is lower than previously expected. Three months ago, we expected growth of 3.7% in 2015. Now we forecast 2.5% growth for the year, following manufacturing production growth of 3.5% in 2014. Many of the adverse shocks that are slowing growth this year will be absorbed and will not hold down 2016 growth. With a return to a normal winter next year, manufacturing production should get a boost, posting 4.0% growth before decelerating to 3.1% growth in 2017.
Report provided by MAPI. Written by Dan Meckstroth PhD.