MAPI Predicts a Growth of 3.9% for the Manufacturing Sector in 2016

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MAPI  Foundation, the research affiliate of the Manufacturers Alliance for Productivity and Innovation is predicting a rebound for the manufacturing sector in 2016.

Due to a harsh winter, manufacturing industrial production fell 1.0% in the first quarter of 2015 after 3.5% growth in 2014. The weather played a big part in the decline as it impeded construction, commercial activity and trade. This is not expected to hinder future growth with forecasts of 3.5% growth in 2015 and 3.9% in 2016.

“A number of factors that drove growth last year have changed in 2015,” said MAPI Foundation Chief Economist Daniel J. Meckstroth, Ph.D. “A sudden, rapid decline in oil and natural gas prices was good for energy users but caused problems in energy drilling, exploration, and the material supply chain; a sudden, rapid rise in the value of the dollar hurt our trade competitiveness; a large inventory buildup this past winter drove the inventory/sales ratio to unwanted highs; and finally, consumers are cautious and risk-averse.

“Many of these shocks that are slowing growth this year will be absorbed and will not hold down growth in 2016,” he added. “Presuming we have a return to a ‘normal winter’ this year, manufacturing should get a boost.”

Job growth, reduced housing debt and increased confidence are some of the major factors that are driving economic growth. Mining and oil and gas fields are expected to take a hit in 2015 and 2016 as oil prices will discourage shale drilling and drilling equipment investments. The overall future forecast for the manufacturing looks bright for the time being. For now it seems as if the manufacturing sector will continue to drive economic growth and be a leading industry in contributing to overall GDP growth.