Savannah Duncan
With an increase in jobs and exports, as well as a decrease in vacancy rates, the United States manufacturing market continues to display signs of recovery. A new white paper by Carolyn Bagnall, director of research based in Cassidy Turley’s Kansas City, Missouri, office, explores the manufacturing market and the outlook for the remainder of the year.
“With both domestic and global consumption rebounding — albeit at a choppy rate — America has steadily increased production of vehicles and parts, semiconductors, civilian aircrafts, clothing, fuel oil and commodity-based food items, to name a few,” Bagnall says.
As a result, the U.S. manufacturing sector added 335,000 jobs between January 2011 and June 2012. According to Bagnall, this is the strongest stretch of job creation in manufacturing since the 1990s.
Falling Vacancy Rates
Another sign of resurgence is that vacancy rates for manufacturing facilities continue to fall. More than 116 million square feet of warehouse space has been leased during the last 15 months. In the first quarter of 2012, the vacancy rate for manufacturing facilities was 7.8 percent, down half a point from the end of 2011.
“The markets that showed the greatest improvement were primarily on the West Coast or in the central industrial belt,” Bagnall says.
Several markets in the West and Midwest have experienced drastic improvement in vacancy rates. Columbus, Ohio, for example, posted 5.8 percent vacancy in the first quarter of 2012, compared to 7.9 percent in the third quarter of 2010. Oakland, California, reported a first quarter vacancy rate of 9.7 percent, down from 13.8 percent in the third quarter of 2010.
Strength In Retail And Export Numbers
One of the main drivers of the U.S. manufacturing market is retail sales. In the first quarter of 2012, retail sales passed the pre-recession peak, reaching an excess of $1.2 billion. “Record-low mortgage rates have helped,” Bagnall explains. “Although few are buying homes, many are refinancing at lower rates and lower monthly payments. Also, gas prices did not make the leap upward that was projected a few months ago. The money left in consumers’ pockets has been available to spend elsewhere.”
Exports also exceeded pre-recession levels. In the first quarter of this year, exports totaled $252.5 billion, a 43 percent increase from the low of $176.6 billion in the first quarter of 2008.
“U.S. consumers will be the key to continued recovery,” Bagnall says. “It appears that with a bit of encouragement from gas prices, mortgage refinancing or other factors, consumers are willing to be confident and to spend. This reinforces the virtuous cycle of growth in manufacturing jobs, leading to retail spending which supports manufacturing.”