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Manufacturing Growth Forecast to Slow in 2008

A worsening housing collapse continues to depress related industries, making for turbulent times in the US manufacturing sector.

By John McCloud | Updated on April 15, 2008

ARLINGTON, VA-A worsening housing collapse continues to depress related industries, making for turbulent times in the US manufacturing sector, according to the Quarterly Industrial Outlook released March 31 by the Manufacturers Alliance/MAPI. The Arlington-based organization, however, says that any gloom this year should give way to a rebound in 2009.

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.

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