Manufacturing is Expected to Improve

[M.D. Holloway]

MAPI Forecast Points To Improved Growth
Manufacturing.Net - May 31, 2007

The Manufacturers Alliance/MAPI said Thursday that despite a soft beginning, the remainder of 2007 should see an improvement in the U.S. economy.

According to the Quarterly Industrial Outlook, manufacturing industrial production grew at a 0.9 percent annual rate in the first quarter, but should grow at a 3 percent rate for the second quarter.

For the year, manufacturing production growth is expected to slow from 4.7 in 2006 to 2.1 percent in 2007, then rebound to 3.3 percent for 2008.

“The manufacturing inventory correction is over, the inexplicable decline in exports has passed, the January 1, 2007, EPA diesel engine emissions regulation is in effect, and the worst of the housing collapse has occurred,” said Daniel J. Meckstroth, Ph.D., Manufacturers Alliance/MAPI Chief Economist. “As long as the general economic expansion continues, conditions in manufacturing will improve.”

Sixteen of the 27 industries covered by the report had inflation-adjusted new orders or production above year-ago levels, down slightly from the 18 industries reporting growth last quarter.
There were no standout sectors, but industries seeing double-digit year-over-year growth included: communications equipment with 20 percent; navigation, measuring, electromedical and control instruments with 17 percent; aerospace products and parts with 14 percent; and industrial machinery with 14 percent.
Consumer-oriented industries were the weakest sector, as housing activity dropped 31 percent in the first quarter. Ventilation, heating, air conditioning and commercial refrigeration equipment slipped 11 percent.

According to Meckstroth, six industries are in the accelerating growth (recovery) phase of the business cycle, 11 are in the decelerating growth (expansion) phase, five are in the accelerating decline (early recession or mid-recession) phase, and five are in the decelerating decline (late recession or very mild recession) phase.

MAPI expects aerospace products and parts to experience double-digit growth 2007 and 2008, growing 14 percent each year. Communications equipment is expected to grow 17 percent in 2007 and 9 percent in 2008. Mining, oil and gas field machinery should see a 5 percent growth rate for 2007, with a stronger showing in 2008 at 12 percent.
Construction machinery is forecast to slip 9 percent in 2007 and 1 percent in 2008. The household appliance industry is expected to see a 9 percent drop in 2007 and a 3 percent drop in 2008.



For April, the manufacturing sector expanded to its highest level in nearly a year and beat analyst forecasts of only a slight increase from March.

The Institute for Supply Chain Management’s (ISM) April Report on Business PMI registered 54.7, the highest mark since July 2006. The index measured 50.9 in March and was predicted to inch to 51 for April.

“Manufacturing activity increased in April as the PMI reflects accelerating growth for the month. New Orders and Production improved significantly as did Employment. Manufacturers are now in their ninth month of inventory reduction, so supply chains are generally in balance,” said Norbert J. Ore, C.P.M., chair of the ISM Manufacturing Business Survey Committee. “On the negative side, prices continue to rise at a rapid rate with metals and energy being the areas of greatest concern to buyers.”

New orders, order backlogs, production and employment saw significant increases this month. New orders rose 6.9 points to 58.5, production was up 4.3 to 57.3 and employment was up 4.4 points to 53.1. Backlog of orders increased 7.5 points to 54.5.
According to Ore, wood products saw a surge in employment this month, and the housing and automotive sectors were pushing employment in their respective subindustries. He added that he does not feel this is a long-term trend.

Inventories slipped 1.2 points to 46.3 and the customers’ inventories index was down 1 point to 47. Ore noted that manufacturers had been reducing their inventories over the past five months and the new orders and production increases this month could be an overcorrection of that. The jump in numbers may also be due to the change in the housing and automotive sectors.

For the month, prices rose 7.5 points to 73. Plastics and rubber were among the industries seeing the highest price increases, as they are energy-based and rise with energy costs. Metal fabricators also saw an increase, Ore said, due to increases in prices for nickel copper and aluminum.

“The April 2007 ISM report on manufacturing activity was a positive signal amid uncertainty and weakness in the economy,” said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI. “At 54.7 the ISM index is the highest it has been since May 2006. Orders, production, and backlogs all made substantial improvement over the March levels. The first look at April 2007 business activity, coming only days after weak first quarter GDP growth was reported, should give forecasters confidence that the deceleration over the last six months was primarily housing-related and that the loss of home equity is not systemically causing a significant deceleration in overall consumer spending.”

Ore echoes Meckstroth’s impression, noting that manufacturing has typically “taken it on the chin” in instances of an economic slowdown, but the sector held its own this month.

[red-beard]

At least for my company, manufacturing is booming. The demand is more than our entire industry can keep up.

[lendaddy]

Originally posted by red-beard
At least for my company, manufacturing is booming. The demand is more than our entire industry can keep up.

Leads appreciated

[trader220]

Pending home sales data was a joke todat and its going to get worse IMHO