Manufacturing & Distribution Industry Forecast

March 2012
Industry Intelligence from First Research, a division of Hoover's (a D&B company)
First Research forecasts are based on INFORUM forecasts that are licensed from the Interindustry Economic Research Fund, Inc. (IERF) in College Park, MD. INFORUM's "interindustry-macro" approach to modeling the economy captures the links between industries and the aggregate economy.

Manufacturing Production Growth Moderates
The output of the US manufacturing sector is forecast to grow at an annual compounded rate of 4 percent between 2012 and 2015. Data Published: March 2012

Wholesale Industry Growth Strengthens Then Plateaus
The output of the US wholesale industry is forecast to grow at an annual compounded rate of 4 percent
between 2012 and 2015. Data Published: March 2012

Warehousing and Storage Growth Levels
The output of US warehousing and storage services is forecast to grow at an annual compounded rate of 3 percent between 2012 and 2015. Data Published: March 2012

QUARTERLY INDUSTRY UPDATe

Manufacturing Employment Improves - The US manufacturing sector gained 50,000 jobs in January 2012 from the month before, marking the biggest rise in manufacturing employment in a year. Economists suggest the increase is due to the recovery of the automotive industry, falling productivity, and fewer worries about the European debt crisis, according to USA Today. Productivity rose after the late-2000s recession as factories increased their use of manufacturing technology and got more work from employees. However, many manufacturers are discovering they've reached the limit of how far they can leverage increases in technology with a pared-down workforce. Of the 50,000 manufacturing job gains in January, 44,000 came from makers of durable goods, primarily vehicles and the parts used in their assembly. While the European economy still represents a threat to the health of the US manufacturing sector, manufacturers have been encouraged by European leaders' commitment to avoiding economic calamity.

Transportation Equipment Demand Helps Fuel Production Gains - US industrial production, an indicator of demand for manufactured goods, rose 4.1 percent in 2011 compared to 2010. Production of motor vehicles and other transportation equipment was particularly strong in 2011. Production of heavy duty trucks improved 62.1 percent, and automobile and light duty motor vehicle production rose 11.3 percent. Railroad rolling stock production saw an improvement of 12.4 percent; production of aircraft and parts grew 10.4 percent. Production gains in the transportation equipment segment are particularly significant to the manufacturing sector overall, as they fuel demand for suppliers and other support industries throughout a vast supply chain. Several key support industries for the transportation equipment sector enjoyed growth in 2011, including industrial machinery, rubber products, forging and stamping, and machine shops.

Sales of Automated Vehicle Systems Increase - Members of the Automated Guide Vehicle Systems Industry Group report that sales grew 25 percent in 2011 compared to 2010, according to the Material Handling Industry of America. More distribution companies are choosing automation to increase productivity, decrease damage to products and equipment, and lower operating costs. Automated guide vehicle systems (AGVS) are computer-controlled wheel-based load carriers that run on the floor without needing a driver. AGVS can be guided by magnetic strips, lasers, buried inductive wires, or other methods. While the majority of sales are to manufacturing companies, about 25 percent of the automatic systems sold in 2011 were installed in distribution centers, according to the AGVS Industry Group.

Manufacturing Technology Consumption Rises - US manufacturing technology consumption, an indicator of demand for industrial supply wholesalers, grew 12.7 percent in December 2011 compared to December 2010, according to the American Tool Distributors Association and the Association for Manufacturing Technology. Consumption was up 12.2 percent in December 2011 over November 2011. Regions posting the strongest growth were the Northeast and the South, with increases of 28 percent and 83 percent, respectively. The weakest region was the West, where consumption fell 22 percent.

Warehouse Construction Grows - General commercial warehouse construction, an indicator of demand for warehousing and storage services, grew 34 percent in January 2012 compared to the year before. Improvement came along with increased construction activity for several manufacturing segments. Construction related to computer/electronic/electrical, plastic/rubber, and chemical manufacturing grew 107 percent, 73 percent, and 56 percent, respectively, during the period. Warehousing and storage companies depend largely on the flow of goods, so commercial construction growth indicates better prospects for warehouse providers.

Industry Supports Federal Transportation Bill - The warehouse logistics industry has thrown its support behind proposed federal legislation aimed at funneling $260 billion toward highway and other transportation projects. Transportation infrastructure projects stemming from passage of the American Energy and Infrastructure Jobs Act of 2012 could create significant new jobs from improvements in freight management, according to the International Warehouse Logistics Association. The House resolution would include funding for trucking, freight rail transportation, port activity, and intermodal transfers. Many warehousing and storage providers offer freight transportation arrangement among their services.