Although the economic slowdown in the U.S. manufacturing industry continued to worsen through the first half of 2008, production rates will stabilize in the second half of the year and will begin to grow again in 2009, predicts a report on the health of the manufacturing sector issued today by the Manufacturers Alliance/MAPI trade group.
Not surprisingly, the deep <a href="http://www.managingautomation.com/maonline/news/read/2008_Shaping_Up_to_Be_a_Bumpy_Ride_31475" target="_blank">slump in the housing and construction market</a> accounted for much of the slowdown in manufacturing production in the first half of the year, with industries such as electric lighting and appliances hit hardest. Housing starts should improve 25% in 2009, however, the report predicts.
At the same time, lower interest rates, strong net exports, and the effect of government tax rebate checks sent to consumers in the second quarter will support a return to manufacturing sector growth in the second half of 2008 and stronger growth in 2009.
Overall, manufacturing industrial production declined 1.4% in the first quarter of 2008 compared with the same period a year earlier. It is expected to decline at a 2.5% rate in the second quarter ending in June, the report says.
The manufacturing sector's prospects should improve in the second half of this year and through 2009, however. For the full year 2008, the MAPI report says, manufacturing industrial production should recover to post a .4% increase before improving to 3.1% growth in 2009.
"The manufacturing sector is in a recession, whether a recession is officially declared for the general economy or not," said Daniel J. Meckstroth, chief economist for the Manufacturers Allliance/MAPI, in a prepared statement. "Yet, as the housing collapse worsens and drags with it related industries, the Federal Reserve's actions to dramatically lower interest rates, robust rebate checks now being sent to American consumers, and continued strong net exports will lead to production growth in the second half of 2008."
Thanks, in part, to the weak dollar and lower interest rates, exports have continued to be a bright spot for the manufacturing sector. Overall, inflation-adjusted exports are expected to increase 8.3% in 2008 and 9.7% in 2009, the report says.
High-tech industries — computers, communications equipment, and semiconductors — are benefiting from strong exports. Production of communications equipment grew 23% in the first quarter of 2008; production of aluminum and material handling equipment grew 13% in the first quarter.
The manufacturing verticals that suffered the most in the first quarter were housing-related. Ventilation, heating, air conditioning, and commercial refrigeration equipment production fell 15% in the first quarter.
Through 2008, 11 of the 24 manufacturing verticals that MAPI tracks will show production gains, led by mining and oil and gas field machinery, at 21% growth, and communications equipment, with 18% growth.