Manufacturing: Economy showing signs for 2010 recovery
Staff -- Modern Materials Handling, 6/1/2009
The manufacturers alliance/MAPI (www.mapi.net) Quarterly Economic Forecast predicts that inflation-adjusted gross domestic product (GDP), which grew by 1.1% in 2008, will decline 2.9% in 2009 before rebounding to 1.9% growth in 2010. The GDP forecast for 2009 in the current MAPI report is lower than the previously anticipated 2.1% decline for this year projected in the February 2009 release.
"We are in a severe global recession where manufacturing is taking the brunt of the decline. Fortunately, we are starting to see signs of economic conditions beginning to stabilize," says Daniel Meckstroth, Manufacturers Alliance/MAPI chief economist. "We expect that the eventual recovery will be sluggish due to continued deleveraging by consumers as they move away from excessive debt and to greater savings."
"There are nonetheless inklings of a future firming economy," he adds, "including the stimulus package beginning to take effect, tax cuts, rising consumer spending, strengthening commodity prices, and recent improvement in the stock market. These 'green shoots' offer a glimmer of hope moving into the latter stages of 2009 and into 2010."
Meckstroth believes manufacturers' profitability will be in a better position coming out of the recession than they were after the previous downturn in 2001. "While it still may take years to recoup production levels, industry learned a lesson in frugality in 2001," he says. "Manufacturers did not over-invest in this cycle and they proactively cut costs at the first sign of falling demand."
Manufacturing production growth declined by 3.2% in 2008, MAPI expects an 11.8% decline this year. Relief comes in 2010 with manufacturing production anticipated to grow by 2.1%. Production in non-high-tech industries is expected to decline by 11.6% in 2009 before increasing by 2.1% in 2010. High-tech industrial production is expected to decline by 10.7% in 2009 before rebounding to strong 8.5% growth in 2010.
The expenditure category for inflation-adjusted investment in equipment and software is likely to decrease by 18% in 2009, preceding 8.5% growth in 2010. Inflation-adjusted expenditures for information processing equipment are expected to fall 10.6% in 2009 before rising by 7.8% in 2010.
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