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Supply Chain News: MAPI Projects US will Finally Surpass Peak 2007 Manufacturing Output – in 2019

  MAPI Nearly Doubles its Forecast of Manufacturing Growth through 2021, with Even the Apparel Sector Seeing Some Good News

April 4, 2018
SCDigest Editorial Staff

Estimating where US manufacturing stands in historical terms is not as easy as you might think.

Supply Chain Digest Says...

MAPI estimates a near doubling of its projection for average US manufacturing growth for the 2018-2021 period, from 1.5% to a pretty decent 2.8%.

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For example, as SCDigest just reported, the US Bureau of Economic Analysis says manufacturing's share of US GDP continues to decline, from roughly 28% of nominal GDP in 1960 to about 20% by 1980 and now just about 12% in current times.

But, recently wrote Brookings Institution economists Martin Baily and Barry Bosworth, if you look at US manufacturing value-added as a share real – not nominal – GDP, the picture is much brighter, with that number actually holding fairly steady at around 13% for more than 50 years. However, even Baily and Bosworth note it is almost impossible to be very confident in those numbers. (See Just what Share of US GDP comes from the Manufacturing Sector?)

Another way to look at US manufacturing strength is by the output numbers from the sector reported monthly by the Federal Reserve. But here the story is not so straightforward either.

In August of 2014, the Fed reported that US manufacturing output had at long last finally again reached levels of the previous peak year of 2007, when the output index from the Federal Reserve climbed back to the 100 level (2007 baseline) in July of 2014 and stayed above there for many months.

That seemed like good news at the time. But then in early 2016, after a revision to the data, that milestone evaporated, and US manufacturing production late in 2015 was below 2007 levels some eight years later.

It is still below those peak 2007 level here 11 years later.

But now, a blog post on the MAPI Manufacturing Alliance web site says the US will top the previous peak again – in 2019.

MAPI says that "The global economic rebound along with the passage of tax reform legislation in the US and the resumption of a much-needed dollar depreciation that began in the early months of 2017 has given rise to the MAPI Foundation's outlook for the best US manufacturing growth performance in more than a decade."

In fact, MAPI projects that the US manufacturing sector will fully regain all lost output by April 2019, just short of a decade since a trough was reached in June 2009, as seen in the chart below.


(Article Continued Below)



MAPI adds that its current forecast represents a measurable jump from its November 2017 outlook, and actually represents a near doubling of its projection for average US manufacturing growth for the 2018-2021 period, from 1.5% to a pretty decent 2.8%.

"While seemingly dramatic, this marks the return to a long-term normal for factory sector growth," MAPI comments, adding such performance "has long been impeded by the financial crisis, the Great Recession, and the weak and risk-laden years of global performance that followed."

MAPI also cited as positives a likely meaningful improvement in the outlook for capital spending and for export growth.

While the US textile sector will remain battered, MAPI even predicts growth in US apparel manufacturing by 2020, fueled in part by new production technologies that will make domestic manufacturing more viable.

Are you surprised it has taken this long to get back to 2007 US manufacturing levels? Let us know your thoughts at the Feedback section below.


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