US manufacturing flat in Q2, outlook downgraded for 2011-2012

20 September 2011 17:03  [Source: ICIS news]

WASHINGTON (ICIS)--US manufacturing industrial production was flat in the second quarter this year after a promising first quarter start, the Manufacturers Alliance said on Tuesday, noting that it was downgrading its outlook for production for this year and next.

The alliance said that while US-based manufacturing expanded at an annualised 7% in the first three months of this year, production growth in the second quarter was relatively flat.

Manufacturers Alliance chief economist Daniel Meckstroth attributed the second quarter flat-line to a series of shocks, including the tail end of a severe North American winter season, widespread spring flooding, the supply-chain impact of the Japan tsunami, high commodity prices and the ongoing housing industry recession.

While they are part of the broad US manufacturing sector, petrochemicals producers and downstream chemical and resins makers also rely heavily on other manufacturing segments – automotives, machinery, durable goods, housing materials, etc. – as key industrial consumers of chemicals and plastics.

Although US manufacturing was expected to experience growth for the full year of 2011 and through 2012, Meckstroth said that the alliance has had to downgrade its outlook for manufacturing performance overall for the two years.

In May, the alliance had predicted that US manufacturing would see growth rates of 6% for full-year 2011 and a 4% expansion in 2012.

But those forecasts have been adjusted downward, he said, to a 4% expansion for manufacturing production this year and a growth rate of 3% in 2012.

Meckstroth said the downgrade was driven by the recognition of weakening in the US consumer sector and related business concerns about sales prospects going forward.

However, the US manufacturing sector was likely to outpace the nation’s overall gross domestic product (GDP) performance, he said.

The alliance does not expect US GDP to expand by more than 1.6% this year or more than 2.1% in 2012.

In ordinary times, the US economy would be expected to grow by 3% to 3.5% annually, and the nation needs GDP growth of at least 2.5% just to accommodate new workers entering the job market each year.

The White House recently said that it expects US unemployment, now at 9.1% and with some 14m workers idled, to remain at or above 9% through 2012.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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