Manufacturers see 'significant' slowing in 2007
Sep 8, 2006 (MarketWatch)

Machinery for mining and oil & gas may be only sector to grow double-digits

The manufacturing sector will likely show pronounced slowing next year after a moderate acceleration this year, said the Manufacturers Alliance/MAPI in a quarterly outlook released Thursday.

After an expected 5% increase in manufacturing industrial production this year, the trade group sees growth slowing to half that rate next year, as consumers cut down their consumption of cars and houses.

"The big ticket consumer markets (motor vehicle and housing) are already declining," said MAPI chief economist Daniel Meckstroth in an interview. "This will affect related industries like appliances, wood, furniture, etc."

The homebuilding sector should report a drop in production this year and next. MAPI expects housing starts to fall 8% this year and 9% next year, said the trade group.

Higher interest rates have pulled the rug out from under the housing market. On Thursday, the National Association of Realtors forecast that national home prices will probably fall as the market corrects.

AntiSpin: The knock-off effects of a slowdown in housing are starting to figure into the growth projections of consumer goods manufacturers. The question is, when will this start to have a negative impact on hiring plans and employment, and when will that in turn feed back into lower demand?

With household debt service ratios already at historical highs, the economy will not be able to squeeze much more out of consumers via expanded credit. A major source of cash for consumer purchases, home equity, is also tapped out. The recession that already exists for a large segment of American society may expand to include enough households that negative GDP growth, an official recession, may register toward to middle part of 2007.