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Economic Outlook n° 1187 | Special Report | The Reindustrialization of the United States


Euler Hermes


ted, with the first half of 2012 experiencing a slower rate of decline. A final segment of note, communication equipment production has been lagging far below its 2007 level despite a rebound in 2010. The 2012 output increase is expected to slow dra- matically (estimated at +3.5%) because the two main growth drivers appear to have paused in their ascent. 2013 will follow this downward trend (+1.5%).


▶ Machinery This sector contributed strongly to U.S. manufactu- ring output expansion with double digit growth in 2010 and in 2011. It is also expected to regain its pre- recession average annual production in 2012. All the subsectors have posted significant production increases during this period following a rebound in investment in the aftermath of the crisis. Two sub- sectors have been significant growth drivers and have shown higher levels of production in 2012 than in 2007/2008: > Mining, oil field and gas field machinery (out- put:+2.6% in 2010 and +21.3% in 2011 and +14.9%(estimated) in 2012). This segment has thri- ved in the wake of the surges in oil industry extrac- tion capacity and that of the shale gas industry in the U.S., driven by the development of new technologies. > Engine, turbine and power transmission equip- ment (output: +9.7% in 2010 and +22.6% in 2011 and +18.5% (estimated) in 2012). The noticeable deve- lopment of the renewable energy sector has fostered growth in this segment. The construction and metalworking machinery sec- tors also have fared reasonably well in 2012. The underlying conditions which stimulated machi- nery sector growth over the recent years - including


11. Industrial Production Index: the “shining” manufacturing sectors Index basis 100 =2007


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among others, booming investments in fossil and renewable energy, strong global economics favora- ble to U.S. exports - are likely to fade in 2013 with the current fiscal/budget uncertainty weighing its prospects down dramatically. The expectation is that the output growth of the machinery sector should be rather limited (+3%).


▶ Petroleum and coal product manufacturing This sector has reclaimed its pre-recession bench- mark due to momentum posted by the “paving, roo- fing and other petroleum and coal products” sector, which increased its production by 8.6%, 15.1% and 13.1% (estimated) in 2010, 2011 and 2012 respecti- vely. This momentum was due in large part to the federal stimulus package aimed at boosting the U.S. economy and included $36.2 billion for transporta- tion (highway infrastructure, high-speed rail corri- dors) and $30.0 billion for infrastructure. In 2013, the petroleum and coal product manufacturing sector won’t be able to rely on such public support and is likely to suffer from this less favorable environment.


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▶ What about the car industry? Despite uneven global economic performance, inclu- ding weakness in Europe, many global automakers have reported rising sales and profitability, driven by growth in emerging markets and China in particu- lar. In the U.S., auto sales posted a second year of growth due to easier credit, low interest rates, and pent-up demand resulting from the recent recession and an aging vehicle fleet. North American auto sup- pliers are benefiting from rising automotive produc- tion and leaner cost structures. Many are now more profitable than before the downturn. The outlook for both the automotive manufacturers and suppliers is positive, reflecting expectations for rising demand in the U.S. In addition, emerging markets led by China should drive global demand, despite slowing regio- nal economic growth and debt issues affecting Euro- pean demand. The U.S. automotive market is still strengthening: it will grow 12% to 14.8 million vehi- cles in 2012 and we expect it to grow 5% more to 15.5 million vehicles in 2012. That will still be 1.5 million vehicles short of the pre-crisis benchmark.▣


80 Computer and electronic products 60


Automotive Machinery


Petroleum and coal products 40 2007 2008 2009 2010 Source: Federal Reserve Bank 15 2011 2012 (es) 2013 (f)


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