Manufacturing is growing but slowly

National Association of Manufacturers Chief Economist Chad Moutray forecast 2.8 percent growth in real gross domestic product this year after a sluggish first quarter. The manufacturing sector has shown signs of weakness over the last four months, but the March numbers point to a potential turnaround, he told steel industry leaders at a recent American Iron and Steel Institute conference in downtown Chicago.

The manufacturing sector — which is heavily concentrated in Northwest Indiana — grew by 4.5 percent nationally last year.

"It was a pretty strong level of growth overall for the manufacturing sector," Moutray said.

But near the end of the year, the industry started facing serious headwinds, including a strong dollar, a trade imbalance and dim prospects of expanding its export base.

The United States hit an all-time high of exports for the first straight year last year, shipping $1.4 trillion in goods abroad to countries like Canada, Mexico, Japan and China, but the growth in exports has been slowing dramatically, Moutray said. U.S. exports fell from 2.6 percent growth in 2013 to just 1.9 percent growth last year, and the growth curve is nearing its natural end.

Overall economic growth slowed to about 0.2 percent in the first quarter.

The only bright spots were increased spending on services, especially health care, and inventory replenishment, Moutray said.

"That's a bit of a mixed blessing," he said. "If you're not wise and consumer spending is not there and you've just stocked up on inventories, it will have an impact."

After years of 3 percent to 4 percent growth, consumer spending was essentially flat in the first quarter — up only 0.2 percent on durable goods. Vehicle-buying declined over the first three months of the year before picking up a little in March.

Manufacturers are still generally upbeat about the next few months, Moutray said.

"They're cautiously optimistic, so hopefully that materializes," he said.