MAPI survey: Recovery to continue

Job and wage gains buoy modest recovery; but private nonresidential construction  declines 21 percent.

The pace of recovery in the general economy has clearly slowed, but the deceleration is less visible in the manufacturing sector, according to the Manufacturers Alliance/MAPI U.S. Industrial Outlook.

"Despite less consumer spending growth in the second quarter, there was nevertheless some employment growth and modest wage increases. Also, the prolonged downturn and sluggish recovery have created pent-up demand for some durable goods, including sales of motor vehicles and appliances," said Daniel J. Meckstroth, Ph.D., chief economist for the Manufacturers Alliance/MAPI and author of the analysis. "In addition, the inventory swing is greatest in manufacturing; exports are predominantly manufactured and benefitted from the fast global trade bounce back; and business investment in equipment rebounded much faster than consumer spending, thus making the pace of the industrial recovery stronger than that in the general economy."

Manufacturing industrial production, measured on a quarter-to-quarter basis, grew at an 8 percent annual rate in the three months ending July 2010, after expanding at a 5 percent annual rate in the three months ending April 2010. MAPI predicts the superior growth trend for manufacturing will continue, but decelerate, increasing 6 percent overall in 2010 and advancing 5 percent in 2011. At this pace it will be late 2012 before manufacturing production exceeds the December 2007 pre-recession level.

Production in non-high-tech manufacturing expanded at an 8 percent annual rate during the May-July 2010 period. According to the MAPI report, non-high-tech manufacturing production is expected to increase approximately 5 percent in 2010 and 4 percent in 2011. High-tech industrial production rose at a 10 percent annual rate in the May-July 2010 time frame. MAPI anticipates that it will post strong 15 percent growth in 2010 and 13 percent growth in 2011.

There was an upward trend in the May-July 2010 figures for the various components of the manufacturing economy. Twenty-two of the 27 industries tracked in the report had inflation-adjusted new orders or production above the level of one year ago, three more than reported in the previous three months ending in April 2010. Iron and steel production grew by 68 percent in the three months ending in July 2010 compared to the previous three months, while industrial machinery production improved by 58 percent in the same window.

The largest drop came in private nonresidential construction, which declined 21 percent, while public construction and aerospace products and parts each experienced a 4 percent decline.

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