The MAPI Foundation (the research affiliate of the Manufacturers Alliance for Productivity and Innovation) recently released its latest U.S. Industrial Outlook, a quarterly analysis of 27 major industries. For a general overview of the report, click here.
However, Chief Economist Dan Meckstroth also indicated a collection of specific sectors within the manufacturing marketplace with stronger growth trajectories in 2016. They include:
- Construction/Housing. Housing start-ups are showing gains of 10 percent in 2016; 16 percent in 2017, and six percent to 1,495,000 units in 2018. In the three months ending January 2016, new home sales were five percent above year-ago levels and up 30 percent at an annual rate from the previous three months. New housing starts are expected to grow at a rapid pace in the next three years because they are at a low level relative to the pace of expected household formations. At the end of the fourth quarter of 2015, the combined percentage of all mortgage loans in foreclosure or delinquent was at its lowest level since the third quarter of 2006. Non-residential construction was up 12 percent in the three months ending December 2015 versus year-ago levels. This emanated from a growth in lodging (hotels), office buildings, oil and gas pipelines and storage, and manufacturing plants in the three months ending December 2015. Construction spending for factories, adjusted for inflation, rose 26 percent during October to December 2015 from one year earlier. The strongest growth was in the processing industries, transportation equipment and fabricated metal products plants. Finally, public construction spending is forecast to increase three percent in 2016 and one percent in both 2017 and 2018.
- Automotive. Motor vehicles and parts production is forecast to grow six percent in 2016 and 2017 and then fall one percent in 2018. Auto and light truck sales are forecast to be 18.1 million units in both 2017 and 2018. Overall production was up five percent in the three months ending January 2016, compared with the same period one year ago. Production fell six percent for automobiles but was up seven percent for light trucks and utility vehicles. Heavy-duty truck production should decline three percent in 2016 and two percent in both 2017 and 2018. Motor vehicles and parts production benefits from low gas prices that encourage the purchase of large, expensive vehicles. So even though gas prices are down, heavy-duty vehicle production is not forecasted to grow.
- Appliances. Household appliance production is projected to grow three percent in 2016, five percent in 2017 and two percent in 2018. Increases in the sector can be tied to the increase of housing start-ups. Household appliances’ import to export ratio is 6.2—one of the highest adverse trade ratios in manufacturing, thus the trade deficit was $376 million more negative in the fourth quarter of 2015 compared with one year ago.
- Pharma. Pharmaceutical and medicine production will increase one percent in 2016 and three percent in both 2017 and 2018. Growth drivers include new product launches and new spending for innovative treatments. IMS Institute forecasts that the increased number and quality of new drugs for cancer, hepatitis C, autoimmune disorders, heart disease and rare diseases will transform treatments in 2020. During the next five years, 75 new orphan drugs are expected for diseases that are currently untreatable. There are also reports of generic manufacturers moving to the United States to be closer to the largest market for drugs.
- Chemicals. Basic chemicals production should post three percent production gains in both 2016 and 2017 and expand five percent in 2018. Overall production was up six percent in the three months ending January 2016 compared with the same period one year ago. Petrochemical manufacturing, which includes ethylene, propylene, styrene and ethyl benzene, along with inorganic chemicals were the primary growth drivers. Some of this growth stems from lower feedstock prices such as oil and natural gas.
- HVAC. The HVAC production forecast is for growth of three percent in 2016, four percent in 2017, and three percent in 2018. In related sectors, construction spending for home improvement was up nine percent and inflation-adjusted private non-residential construction rose 12 percent in the three months ending December 2015 versus one year earlier. HVAC has an import to export ratio of 1.5. Imports fell four percent while exports declined three percent, so the trade deficit was $43 million less negative in the fourth quarter of 2015 compared with one year earlier.
- Metalworking. Metalworking machinery production will increase one percent in 2016 and two percent in both 2017 and 2018. The U.S. Census Bureau reported that metalworking machinery orders grew 23 percent in the three months ending December 2015 on a year-over-year basis. The import to export ratio is 2.6, so the trade deficit was $393 million less negative in the fourth quarter of this year versus one year earlier.
- Material Handling. In the three months ending December 2015, inflation-adjusted material handling orders were up 15 percent compared with one year earlier. Somewhat related is warehousing and storage employment being up eight percent in the three months ending January 2016 versus the same period one year ago.
- Instrumentation. Instrument industry production is expected to grow two percent in 2016, three percent in 2017 and two percent in 2018. Search and navigation shipments (in current dollars) rose six percent in the three months ending December 2015 compared with one year ago. Defense search and navigation shipments gained six percent and non-defense shipments rose eight percent. Manufacturing instrumentation production levels are projected to remain flat.
- Electrical Lighting & Equipment. Electric lighting equipment is projected to climb two percent in 2016 and 2017, and six percent in 2018. At 6.9, electric lighting equipment’s import to export ratio is one of the worst in manufacturing. Imports increased five percent while exports fell nine percent in the fourth quarter of 2015 compared with one year earlier. The trade deficit was $203 million more negative than one year earlier. The forecast for electrical production equipment calls for growth of five percent in 2016, one percent in 2017 and three percent in 2018. Production was up eight percent for this equipment in the three months ending January 2016, compared with one year ago. Transformers and power distribution equipment tend to follow electric utility construction, the creation of new communities and a replacement cycle.So favorable construction numbers lend well to growth in some of these segments.
- Medical. Medical equipment production growth is estimated at four percent in 2016 and two percent in 2017 and 2018. Production increased one percent in the three months ending January 2016 compared with year-ago levels. Surgical and medical instruments production employment increased three percent in the fourth quarter, but surgical appliances and supplies employment was flat.