U.S. Manufacturers Continue To See Strong Growth In 2018

This year continues to be a strong one for U.S. manufacturers, and analysts expect the trend will continue, largely driven by strength in the global economy and tax reform here at home.

The Spring 2018 Semiannual Economic Forecast by the Institute for Supply Management noted the rest of the year is expected to show strong growth in the manufacturing sector. On average, manufacturing executives forecast 6.6 percent revenue growth for 2018, with an increase in production capacity of nearly 5 percent and an increase in capital expenditures of nearly 10 percent.

Popular Mechanics surveyed 26 of the largest manufacturers in the country to learn their thoughts on the future of American manufacturing. Respondents said the biggest advantage of manufacturing in the U.S. was reduced costs by being close to customers.

Andrew Duguay, senior economist with Preveder Software, told MarketWatch manufacturing is now a key to economic growth in the U.S., and that manufacturers will need to continually invest and expand their exports. While the sector made strong recovery in 2017, U.S. consumers have also been weakening due to little wage growth, a softened U.S. dollar and rising inflation. Duaguate notes that interest rate hikes will continue to make credit more expensive and that the total debt in 2017 surpassed the 2008 peak.

“As the consumer continues to weaken, it’s now up to the manufacturing sector to keep the economy afloat by growing its exports and reinvesting the revenue growth from overseas back into the U.S. economy,” Duguay said.

“The real stars of the manufacturing resurgence may be smaller cities.”

Some manufacturing growth may also be partly fueled by new tax laws. National Association of Manufacturers Chief Economist Chad Moutray told Chief Executive that many manufacturers are enticed by tax incentives to bring projects back home. The key will be not only to capitalize on those foreign markets but to expatriate the dollars back to the U.S. and continuing domestic investment.

“To avoid a grim situation, it will be essential that manufacturers take advantage of the conditions that are leading to more opportunities to sell abroad, and in turn, invest those dollars back into the U.S. economy,” Duguay said.

Joel Kotkin, professor of urban studies at Chapman University and executive director of the Center for Opportunity Urbanism, told Forbes.com that over the past eight years, manufacturing as “bounced back strongly from the crater the sector fell in during the Great Recession.” The Institute for Supply Management note that in recent months, 17 of the 18 major industries have been in growth mode. Kotkin noted manufacturing is thriving in several places across the U.S. from the Midwest to the Sun Belt and California.

In what may be construed as a surprise, Orlando-Kissimmee now tops manufacturing job growth across the 71 largest metro areas. It’s being driven by such companies as Siemens Energy, Mitsubishi Hitachi and Lockheed Martin. “Florida is generally well positioned due to its lack of income taxes, reasonable housing prices and generally pro-development policies,” Kotkin said.

Large manufacturing hubs with more than 200,000 manufacturing jobs such as Los Angeles, Chicago and Houston have largely remained flat with little growth in the signs of participating in the reindustrialization trend. Meanwhile, nine of the top areas for industrial growth are in small and medium-sized metros and include places like San Rafael, Calif., Elkhart-Goshen, Ind. And Kankakee, Ill.

“The real stars of the manufacturing resurgence may be smaller cities. As logistics improve it is increasingly possible for smaller areas to compete with larger ones,” Kotkin said.

Read more: Manufacturers On Trump Tariffs: Don’t Do It, Mr. President