The Washington, DC-based National Association of Manufacturers (NAM) comes to a similar conclusion. According to its year-end report released earlier in March, the manufacturing sector underperformed the overall economy in '07 after outpacing the GDP for three consecutive years. Manufacturing production rose by 1.8%, the slowest pace in four years. Moreover, manufacturing production actually declined in two out of the past five quarters after 13 consecutive quarterly advances. Q4 output declined in 14 of the 19 major manufacturing industries, and for the year overall, eight of the 19 major manufacturing industries declined in output.

While overall manufacturing is not in recession, it is clearly struggling, observes MAPI chief economist Daniel J. Meckstroth. With housing starts down 26% in Q4 and expected to plummet another 33% in '08, he says the US remains "in the midst of the most severe housing downturn anyone could have imagined." On the other hand, he adds, the longer term outlook looks much brighter, with a 32% increase in the housing growth rate projected for '09. In line with the improvement, he expects manufacturing production growth to rebound to 3.4% in '09 after rising only 0.5% in '08. NAM projects 1.5% growth this year.

"Any recession is bad news for manufacturing," says Meckstroth. "However, the structure of the current downturn is concentrated in finance, real estate and construction and not on manufacturing-intensive demand such as business equipment and exports. Furthermore, the reduction in consumer spending may well hurt foreign imports more than domestically produced items."