Manufacturing Outlook Blurred by Europe, But Far from Negative

Production in the United States should continue to move forward with solid growth through much of 2012, largely on the strength of the automotive and aerospace industries, says a manufacturing trade association economist and a recent study. Perhaps the bigger question is whether growth in other parts of the world, most notably Asia, will be enough to neutralize problems being caused by the European spiral.

Dan Meckstroth, chief economist and director of research for the Manufacturers Alliance for Productivity and Innovation (MAPI), noted at a January meeting of the National Economists Club in Washington, DC that the organization's latest measurement of the overall business outlook was essentially unchanged between November and December. Meckstroth characterized the level of the index (66) as an "extremely optimistic" view for continued expansion over the next three to six months. Granted, small businesses are somewhat less optimistic because of their dependence on real estate values as a primary asset in most cases.

Meanwhile, because of European Union problems, he estimated the chance of another global recession near 40%. Still, Meckstroth said that he believes Asia's emerging economies, along with the much needed post-disaster Japan should help drive growth and provide enough stimuli for the rest of the world to avoid an outright global downturn.

Meckstroth noted a "major driver" for U.S. manufacturing will be necessary capital spending on the part of most U.S. businesses. "So much capacity was shed [during the downturn], that pickup in demand has created a great need for capital equipment," Meckstroth noted. Other significant drivers for manufacturing, according to the recently unveiled forecast, are tied to aerospace and motor vehicle/parts production. Both are expected to see an annual percentage increase in the double digits. On the latter, Meckstroth noted, "The stock of vehicles has been declining for five years, but it should be growing based on increasing population trends; there is pent-up demand." Computer products and machinery are also expected to make large enough gains to offset expected losses in areas such as printing support activities and textile production, the economist noted

"The U.S. is not going to recapture textiles, and we've lost electronics," said Meckstroth. "But in aerospace, natural gas and mining equipment—high valued products—there is strength."

Brian Shappell, NACM staff writer