Manufacturing produces positive signs

The turnabout is being fueled higher production and manufacturing profits and expanded manufactured exports.
August 11, 2010

Manufacturing is the most depressed construction sector, with no change in that status expected for several years. Nonetheless, the 70% decline since early 1998 has ended. Monthly spending was up in seven of the last 12 months, rising 1.8 % in August. Activity is expected to be steady for the rest of 2003 and then expand 13% next year. The turnabout is being fueled by higher production, higher manufacturing profits, and expanded manufactured exports. Production rose 0.5% from May to August, a 2% annual rate. The production forecast into 2005 is for month-to-month gains averaging 0.3-0.4%. Manufacturers' profits are 40% above a year ago, mostly due to very high labor productivity gains.

Wall Street clearly expects the profit improvement to continue. Manufactured exports began expanding in June as much of Europe, Canada, and Taiwan emerged from a brief economic stall and recession. Higher foreign demand and a cheaper dollar will keep exports rising steadily.

The national manufacturing vacancy rate in the second quarter of 2003 held at about 9.5% for the fourth consecutive quarter, according to the CB Richard Ellis survey. However, the vacancy rate remained two percentage points higher in the 44 largest industrial centers.

The amount of vacant space stayed steady in a stagnant manufacturing market only because construction spending for manufacturing facilities remains at, or possibly below, the replacement level.

A few markets are absorbing space. The vacancy rate declined 2.5% to 15.5% in Washington, D.C.; 1.5% to 11.6% in Westchester County (suburban New York City); 1.4% to 12.5% in Kansas City, Mo.; and 1.0% to 9.7% in Tucson, Ariz. These declines were offset by a 1.5% or larger increase in the vacancy rate in six cities: Stamford, Conn.; Albuquerque, N.M.; Dallas; Jacksonville, Fla.; Palm Beach, Fla.; and Salt Lake City.

Manufacturing vacancy rates, second quarter

Highest vacancy rates Lowest vacancy rates
Jacksonville, Fla. 21.7% Albuquerque, N.M. 5.4%
Palm Beach, Fla. 20.8 Long Island, N.Y. 6.3
Austin, Texas 20.0 Denver 7.3
Baltimore 18.0 Northern N.J. 8.3
Pittsburgh 17.5 Portland, Ore. 8.9
Atlanta 17.3 Cincinnati 8.9
Stamford, Conn. 15.8 Los Angeles 9.1
Phoenix 15.6 Detroit 9.3
Washington, D.C. 15.5 Tucson, Ariz. 9.7
Nashville, Tenn. 15.4 Wilmington, N.C. 9.7
Source: CB Richard Ellis

         
 

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