Arlington, VA — September 2, 2008 — The U.S. manufacturing recession continued its downward trend in the second quarter, and medium-term prospects show only minimal improvement, according to the Manufacturers Alliance/MAPI's "Quarterly Industrial Outlook — Second Quarter 2008," a report that analyzes 27 major industries.
"Automakers drastically cut production in the second quarter to clear out bloated stocks, and housing-related industries continued to reel from the gloom in residential construction," said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI and author of the analysis. "The declines in these major manufacturing industries, directly and indirectly, depress many other industries in the sector."
On an annual basis, MAPI forecasts a decline in the industrial sector this year. Manufacturing production is expected to fall 0.5 percent in 2008 before showing marginal improvement to 1.6 percent growth in 2009.
Manufacturing industrial production, measured on a quarter-to-quarter basis, declined at a 1 percent annual rate in first quarter 2008 and at a 3.9 percent annual rate in second quarter 2008.
High-tech Bright Spot
"High-tech industries such as computers, communications equipment and semiconductors continue to post double-digit unit volume growth and thus helped cushion a more severe downturn that occurred in non-high tech manufacturing," Meckstroth said.
Non-high-tech manufacturing production declined at a severe 5.2 percent annual rate in second quarter 2008 and is forecast to decline 1.8 percent overall in 2008.
There was a significant downturn in the 2008 second quarter figures for manufacturing. Eleven of the 27 industries tracked in the report had inflation-adjusted new orders or production above the level of one year ago, three less than reported in the first quarter. Fourteen industries had production below the level of one year ago, and two remained flat.
Four industries enjoyed strong double-digit, year-over-year growth in the second quarter, led by communications equipment at 21 percent; mining and oil and gas field machinery had 15 percent growth; private non-residential construction enjoyed 13 percent growth; and aluminum and alumina improved by 11 percent.
Housing Shows Greatest Weakness
The largest drop came in housing, with a 30 percent decline in housing starts, while motor vehicle and parts production fell by 15 percent. Industrial machinery production dropped by 12 percent.
Meckstroth writes that one industry, alumina and aluminum, is in the accelerating growth (recovery) phase of the business cycle; 13 are in the decelerating growth (expansion) phase; seven industries appear to be in the accelerating decline (either early recession or mid-recession) phase; and six are 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 for 2008 and 2009. This year will continue to pose challenges for the manufacturing sector, with MAPI forecasting only 11 of 24 industries to show gains, led by communications equipment at 17 percent growth, and mining and oil and gas field machinery improving by 13 percent.
The status quo will linger in 2009, again with only 11 of 24 industries expecting growth, five fewer than in MAPI's previous report. Aerospace products and parts is the lone industry forecast to grow by double digits, 10 percent, in 2009.
Seven industries are expected to experience negative change in both 2008 and in 2009, with electric lighting equipment, appliances and construction machinery showing the most weakness. Electric lighting equipment is expected to decline by 10 percent in 2008 and by 9 percent in 2009, while appliance production is anticipated to drop by 10 percent and by 8 percent, respectively. Construction machinery is forecast to decline by 9 percent in 2008 and then by 8 percent in 2009.
"Automakers drastically cut production in the second quarter to clear out bloated stocks, and housing-related industries continued to reel from the gloom in residential construction," said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI and author of the analysis. "The declines in these major manufacturing industries, directly and indirectly, depress many other industries in the sector."
On an annual basis, MAPI forecasts a decline in the industrial sector this year. Manufacturing production is expected to fall 0.5 percent in 2008 before showing marginal improvement to 1.6 percent growth in 2009.
Manufacturing industrial production, measured on a quarter-to-quarter basis, declined at a 1 percent annual rate in first quarter 2008 and at a 3.9 percent annual rate in second quarter 2008.
High-tech Bright Spot
"High-tech industries such as computers, communications equipment and semiconductors continue to post double-digit unit volume growth and thus helped cushion a more severe downturn that occurred in non-high tech manufacturing," Meckstroth said.
Non-high-tech manufacturing production declined at a severe 5.2 percent annual rate in second quarter 2008 and is forecast to decline 1.8 percent overall in 2008.
There was a significant downturn in the 2008 second quarter figures for manufacturing. Eleven of the 27 industries tracked in the report had inflation-adjusted new orders or production above the level of one year ago, three less than reported in the first quarter. Fourteen industries had production below the level of one year ago, and two remained flat.
Four industries enjoyed strong double-digit, year-over-year growth in the second quarter, led by communications equipment at 21 percent; mining and oil and gas field machinery had 15 percent growth; private non-residential construction enjoyed 13 percent growth; and aluminum and alumina improved by 11 percent.
Housing Shows Greatest Weakness
The largest drop came in housing, with a 30 percent decline in housing starts, while motor vehicle and parts production fell by 15 percent. Industrial machinery production dropped by 12 percent.
Meckstroth writes that one industry, alumina and aluminum, is in the accelerating growth (recovery) phase of the business cycle; 13 are in the decelerating growth (expansion) phase; seven industries appear to be in the accelerating decline (either early recession or mid-recession) phase; and six are 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 for 2008 and 2009. This year will continue to pose challenges for the manufacturing sector, with MAPI forecasting only 11 of 24 industries to show gains, led by communications equipment at 17 percent growth, and mining and oil and gas field machinery improving by 13 percent.
The status quo will linger in 2009, again with only 11 of 24 industries expecting growth, five fewer than in MAPI's previous report. Aerospace products and parts is the lone industry forecast to grow by double digits, 10 percent, in 2009.
Seven industries are expected to experience negative change in both 2008 and in 2009, with electric lighting equipment, appliances and construction machinery showing the most weakness. Electric lighting equipment is expected to decline by 10 percent in 2008 and by 9 percent in 2009, while appliance production is anticipated to drop by 10 percent and by 8 percent, respectively. Construction machinery is forecast to decline by 9 percent in 2008 and then by 8 percent in 2009.
