Quality Magazine

Manufacturing Output Grows

March 1, 2007

WASHINGTON, D.C.-Driven by a 0.7% jump in manufacturing output, the Federal Reserve reported that overall industrial production rose 0.4% in December 2006. “After three consecutive monthly declines, this upturn is a hopeful indication that the recent slowdown in industrial activity may be coming to an end,” says David Huether, chief economist for the National Association of Manufacturers.

“For manufacturing, which accounts for more than three-quarters of industrial output, the 0.7% surge in activity was the strongest gain in six months,” Huether says. “It was driven by solid increases in computers and electronic products, machinery, aircraft and motor vehicles, as well as a number of nondurable products such as apparel and petroleum and coal.”

Throughout 2006, manufacturing production increased by 3.7%. And with overall GDP growth expected to come in at 3.1% in 2006, manufacturing has, for the first time since the late 1990s, outpaced the overall economy for three consecutive years.

“Robust growth in both exports and business investments is the principal reason manufacturing outpaced the general recovery again last year,” Huether says. “This is evident by double-digit growth in both aircraft and electronics production last year as well as strong growth in machinery production.”

At the same time, 2006 was not a banner year for all manufacturers. “For sectors closely aligned with housing, such as wood products, furniture and nonmetallic minerals, production declined by nearly 6%,” Huether says. “Likewise, after significant increases between 2002 and 2004, a second- consecutive decline in car sales caused a contraction in motor vehicle production last year.

“With business investment moderating in 2007 and the housing downturn likely to come to an end by mid-year, the manufacturing expansion will grow more-in line with the general economy, or at about 3%, for the coming year,” Huether adds.