U.S. manufacturers should continue to fare well in 2013, although next month’s election is a wild card that could change that outlook to some degree.
“U.S. manufacturing should do well next year, but a lot depends on the election and policies that the newly elected president and Congress may or may not undertake,” says Stuart Hoffman, chief economist, PNC Financial Services Group. “We’re assuming that some of what’s being called the ‘fiscal cliff’ will probably go into effect but not enough to be fatal to the economy.”
Hoffman expects that most manufacturing sectors will continue to do well, including household goods, energy-related manufacturing, farming equipment and nondefense aerospace manufacturing. Construction-related manufacturing is expected to be a particular bright spot, and automobile production should continue to fare well, though less robustly than the last couple of years.
“We think auto production will still be rising, so auto manufacturers and the related supply chain should do well,” Hoffman says. “It won’t be a big increase over this year. The rate of increase for next year will probably be around 5 percent, whereas this year it’s double-digits.
“But auto production will still be operating at an overall higher level — a higher production level, a higher employment level, a higher productivity level and, ultimately, a higher sales level.”
A few manufacturing sectors are expected to cool down, including heavy truck production, tool and die, defense aircraft (though that too depends on the direction of post-election government policy) and raw materials such as steel, copper and aluminum.
“Production of raw materials is more of a global issue, and while we don’t expect the global economy to fall into recession, we have seen global problems with steel slowing down and a tremendous amount of supply,” Hoffman says. “Some steel companies might not be all that profitable because of the increase in supply, and global supply could easily meet if not exceed the rise in demand.” <<
To learn more, listen to Stuart Hoffman on PNC’s 2012 National Economic Outlook webinar on Nov. 8. To register, go to www.csvep.com/pnc/110812flyer.html.