SCDigest Editorial Staff

The good news: the recession likely already has hit bottom, and the US should see economic growth in the second half of 2009.

The bad news: in general, the ensuing recovery will be weak by historical standards.

That’s the conclusion of the economists at the Manufacturing Alliance (MAPI), according to a new forecast issued this week.

The Manufacturers Alliance/MAPI Quarterly Economic Forecast expects the economy to shrink 2.9% in 2009; however, most of the damage has already occurred. MAPI predicts that there will be a 1.9% increase in GDP the third quarter of 2009 and 2.5% in the fourth quarter.

After 2009, MAPI sees growth rebounding to 2.1% in 2010, and by 3.2% in 2011. Those growth numbers, while encouraging, are well below the type of growth seen after most previous recessions.

While manufacturing activity is expected to fall even harder in 2009, the good news there is that the recovery is expected to be stronger than that of the overall economy: manufacturing production growth is expected to decline 11.9% this year before rebounding to 3.2% growth in 2010, and 5.1% growth in 2011.

Driving that, in part, will be a re-stocking of badly depleted inventory levels.

“A swing from cutting inventory in 2009 to adding inventory in 2010 and 2011 has the impact of boosting production,” says Daniel J. Meckstroth, Manufacturers Alliance/MAPI Chief Economist.

Of course, the forecasts for 2009 and beyond vary by production sector. Production in non-high-tech industries is expected to decline by 11.8% in 2009 before increasing by 1.9% in 2010, and by 4.8% in 2011.  The computers and electronics products sector, normally a consistent growth industry, will also see a drop-off this year, declining by 10.9%. High-tech industrial production, however, is expected to rebound to 8.9% growth in 2010 and by a healthy 15.4% growth in 2011. (See summary forecasts from MAPI below.)

(Manufacturing Article - Continued Below)

Capital Expenditures to Surge in 2010

With the recession, capital expenditures on equipment and technology have also plunged, but, in general, are expected to start rebounding in 2010.

The inflation-adjusted investment in equipment and software is likely to decrease by 17.4% in 2009, before experiencing growth of 8.9% in 2010 and 14.5% in 2011. 

MAPI expects industrial equipment expenditures to decline by a severe 22.7% this year, and to further decline by 0.7% in 2010.  But, MAPI predicts a significant turnaround of 20.5% growth in 2011. 

The outlook for spending on transportation equipment shows extremely wide swings in either direction: a 42.8% decline in 2009, followed by a 52.1% increase in 2010, and a 36.4% advance in 2011.

“There are enough economic indicators that portend an eventual recovery following a long and deep recession,” MAPI’s Meckstroth says, “but any rebound at this point looks to be modest, and fragile, given the unchartered waters in which this occurred.”

Do you concur with the MAPI projections? Do you take these as good or not-so-good numbers? Let us know your thoughts at the Feedback button below.

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