Insights: U.S. Manufacturing:
Is this Resurgence Sustainable?
by Carolyn Bagnall
The U.S. manufacturing sector has been dramatic. During the latter part of 2009 by the bailout, the auto industry bounced
a clear bright spot in the recovery. With and throughout 2010 manufacturing back. Production of $106 billion in the
both domestic and global consumption production grew rapidly. By the first fourth quarter of 2010 was twelve times
rebounding – albeit at a choppy rate quarter of 2011 it exceeded the 2007 greater than the $8.8 billion produced at
– America has steadily increased peak, reaching $1,726 billion. It required the low in the fourth quarter of 2009.
production of vehicles and parts, just six quarters to achieve the new high.
In the second half of 2011 manufacturing
semiconductors, civilian aircraft, clothing,
Manufacturing GDP GDP slipped a bit. The Bureau of
fuel oil, and commodity based food items,
In Chained 2005 Dollars Economic Analysis’ estimate was $1,573
to name a few. Likewise, manufacturing
1,800 billion for the fourth quarter of last year.
employment has clearly reversed the Source: Bureau of Economic Analysis
1,600 Manufacturers may have paused from
downtrend. Since hitting a low point in
their torrid pace while waiting for the rest
$ US, Billions
January of 2011, the manufacturing 1,400
of the economy to catch up.
sector has added 335,000 jobs ending 1,200
in June of 2012. This is the strongest 1,000
Factors Driving Manufacturing
stretch of job creation in manufacturing 800
Manufacturers ramp up production
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
since the mid-1990s, and prior to that 2006 2007 2008 2009 2010 2011
when there is demand from retail sales,
period, one must go all the way back growing exports of manufactured goods,
to the 1970s to find stronger numbers. GDP of Motor Vehicle and Parts
or increasing business investment in
Suddenly, the industrial warehouse sector Manufacturing
In Chained 2005 Dollars equipment. All three were up in 2010.
looks increasingly robust. Over the last Retail sales produce the largest dollar
fifteen months, 116 million square feet Source: Bureau of Economic Analysis
volume. Before the recession cut into
of warehouse space has been leased up, 100 consumer spending, retail sales reached
$ US, Billions
right in line with pre-recession levels. The 80
a peak of $1,128 billion in the second
key question going forward is, of course, 60
quarter of 2008. One year later they fell to
is this resurgence sustainable? 20 a low of $1,007 billion, which was a drop
of 10.7 percent. From there sales volume
Recent Trends Q1 Q3
followed a steady upward trajectory. By
When the recent recession arrived,
the first quarter of 2011 it surpassed the
manufacturing was one of the first The manufacturing of vehicles and parts
pre-recession peak, and it continued to
industries affected. Manufacturing GDP was part of the remarkable turnaround.
climb. In the first quarter of 2012 the
peaked at $1,699 billion in the third From the beginning of 2009 through mid-
total was $1,213 billion, for a gain of 20.5
quarter of 2007. A gradual downward 2010 the production of vehicles and parts
percent in three years.
shift accelerated to a plunge during was lower than any other period since
2008. The cycle’s low of $1,427 billion data became available at the beginning Exports of U.S. manufactured goods
occurred in the third quarter of 2009. of 1987. From this near-death experience also hit a peak in the second quarter of
Manufacturing GDP fell by 16.0 percent it rebounded dramatically. Early in 2009 2008. The total was $245.2 billion for
in eight quarters. the federal government provided $24.9 the quarter. The ensuing drop took them
billion in bailout funds to two of the big down to $176.6 billion in the first quarter
However, the rebound was even more
three, General Motors and Chrysler. Aided of 2009. Exports fell by 28.0 percent in
Copyright © 2012 Cassidy Turley. All rights reserved.
Total Retail Sales (Value) and reached 8.3 percent. It takes time to Markets Showing Greatest Improvement
New Vehicle Sales (Count) close manufacturing facilities, and so the Market Vacancy Vacancy
effects of the recession played out over Q1 2012 Q3 2010
Source: US Census Bureau and Bureau of Economic Analysis
an extended period of time. However, Columbus 5.8% 7.9%
Count in Thousands, SA
$ US, Billions, SA
the beginning of 2011 produced some Indianapolis 7.2% 12.2%
improvement, and by the first quarter of Pittsburgh 7.4% 9.4%
2012 vacancy had fallen half a point to Inland Empire 5.9% 9.6%
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
7.8 percent. During the six quarters of Oakland 9.7% 13.8%
2007 2008 2009 2010 2011 2012
recovery to date the total net absorption Phoenix 10.5% 12.5%
Total Retail Sales New Vehicle Sales
was 34.8 million square feet.
less than a year. Then the climb back
The markets that showed the greatest Markets Showing Continued Weakness
began. In the third quarter of 2011
improvement were primarily on the west Market Vacancy Vacancy
exports of manufactured goods edged
Q1 2012 Q3 2010
past the prior peak and for the first quarter coast or in the central industrial belt. The
Chicago 10.9% 10.3%
of 2012 they reached $252.5 billion. markets where manufacturing vacancy
Cincinnati 13.1% 12.3%
Exports had increased 43.0 percent from increased from high to higher were
Detroit 12.8% 11.8%
the low recorded three years earlier. also in the central industrial belt. Five
markets should be mentioned because Business investments in equipment are
Businesses were somewhat slower to they started with relatively low vacancy important, but data from the U.S. Census
respond with investment in equipment. and maintained it. These markets and Bureau, as shown earlier in this report,
U.S. Census Bureau data show business their most recent vacancies were Dallas indicate they total about $200 billion per
equipment purchases bottomed at – Fort Worth (3.5 percent), Houston (2.8 quarter. Exports of manufactured goods
$136.7 billion in the first quarter of 2010. percent), Minneapolis (4.4 percent), Salt have been slightly higher, with recent
In the fourth quarter of that year they Lake City (1.4 percent) and Seattle (3.7 volume of about $250 billion per quarter.
had climbed again to $193.0 billion. This percent).
was still a bit below the previous peak Retail sales, which the data above show are
of $200.2 billion, which occurred in the Is the Resurgence Sustainable? over $1 trillion per quarter, have a greater
fourth quarter of 2007. Retail sales are one of the keys to the impact. Therefore, U.S. consumers
strength of the U.S. manufacturing will be the key to continued recovery. It
Vacancy in U.S. Manufacturing Space sector. After cutting spending sharply in appears that, with a bit of encouragement
Source: Cassidy Turley Research
2008 consumers gradually returned to from gas prices, mortgage refinancing
shopping and spending. or other factors, consumers are willing
to be confident and to spend. This
Record-low mortgage rates have helped.
reinforces the virtuous cycle of growth
Although few are buying homes, many
6% in manufacturing jobs leading to retail
are refinancing at lower rates and lower
spending which supports manufacturing.
5% monthly payments. Also, gas prices
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 This is the essence of economic recovery
2008 2009 2010 2011 2012 did not make the leap upward that was
and sustainable growth.
projected a few months ago. The money
Meanwhile, Back at the Plant left in consumers’ pockets has been For more information contact,
The recession’s drop in manufacturing available to spend elsewhere. Carolyn Bagnall at 816.412.0244
production led to the closing of some
These factors also aided consumer
plants. By the third quarter of 2010
confidence, which has trended gradually
vacancy in manufacturing facilities
upward since 2009.
Copyright © 2012 Cassidy Turley. All rights reserved.