Hyundai’s car plant in Montgomery, Ala., is running at 110 percent of official capacity. Deere and Caterpillar report double-digit sales increases. U.S. steel production rose 7.9 percent last year.
While consumer demand has waxed and waned, U.S. manufacturing has been a steady performer since the recession. Through January, the Institute for Supply Management’s manufacturing index showed 30 consecutive months of expansion. Factory production is supporting a gradually improving economy while boosting rail and truck shipments and containerized exports.
Most forecasters expect continued improvement in 2012, though the European debt crisis and slowing demand from China and other markets could affect growth. “The most likely forecast for U.S. manufacturing is for positive but moderating output growth,” said Cliff Waldman, economist at the Manufacturers Alliance for Productivity and Innovation.
Manufacturing’s impact is showing up in freight volumes. Bob Costello, chief economist at the American Trucking Associations, credited “solid manufacturing output” and inventory restocking for a 6.8 percent jump in the ATA’s seasonally adjusted For-Hire Truck Tonnage Index in December.
The Association of American Railroads said U.S. carload volume rose 1.1 percent and intermodal volume was up 0.4 percent year-over-year in the first three weeks of 2012, despite decreases in bulk grain. Percentage increases were highest for carload shipments of metallic ores, up 24.2 percent through Jan. 21; petroleum products, up 22.4 percent; and motor vehicles and equipment, which rose 15.6 percent.
Freight transportation may see additional gains in automotive traffic this year. Industry analyst WardsAuto raised its forecast for U.S. light-vehicle production this year to 14.5 million units, a level that would be up 10.5 percent from 2011 and the highest since 15 million vehicles were produced in 2007.
Automakers are ramping up production in U.S. plants. Hyundai said it is maxed out on capacity at its Alabama assembly plant, which produced 338,000 Sonatas and Elantras last year. Detroit’s Big Three automakers General Motors, Ford and Chrysler have said they plan to spend a total of more than $15 million to expand their U.S. operations.
Seeking relief from the strong yen, Japanese automakers Toyota, Honda and Nissan are expanding U.S. capacity with the intention of exporting to other regions.
“We’re looking for opportunities to export more North American models,” Yoshimi Inaba, president of Toyota’s North American operations, said at the North American International Auto Show in Detroit in January. Inaba said Toyota’s export of 100,000 cars from North America in 2011 “is just the beginning.”
German automakers also are increasing U.S. capacity. Volkswagen recently opened a new plant in Chattanooga, Tenn., and is considering construction of a second one to produce Audi vehicles. BMW, a major customer of the Port of Charleston, is expanding its South Carolina assembly plant.
Growth in auto sales and production means more freight for motor carriers and railroads. Like their U.S. counterparts, foreign-based automakers rely mostly on clusters of U.S. suppliers but source many components from other countries.
Factory goods joined refrigerated foodstuffs as key contributors to last year’s estimated 5.4 percent increase in U.S. containerized exports. Journal of Commerce Economist Mario O. Moreno’s December forecast for 2012 called for a 3.8 percent increase.
One of the highlights in last year’s export volume was shipments of U.S.-made agricultural machines and parts. Through last November, exports of these goods totaled 51,998 20-foot equivalent units, up 54.5 percent from the 12-month total in 2010.
“We’re looking for further improvement in the year ahead as a result of some pickup in overall economic conditions and a global farm sector that shows every sign of continuing to charge ahead,” Susan Karlix, manager of investor relations at equipment maker Deere, said at the company’s earnings announcement in November.
However, Europe’s sovereign debt crisis could affect demand for U.S. factory goods, especially if banks tighten credit. “This is a small planet, and things knock into each other very easily,” Waldman said.
U.S. manufacturing numbers closed 2011 strongly. Manufacturers’ orders for goods expected to last at least three years rose 3 percent, led by gains for cars, commercial airplanes, machinery, communications equipment and primary metals.
The improved numbers are driven by post-recession inventory restocking and by U.S. manufacturers’ investments in overseas markets, Waldman said.
“Manufacturers, particularly the larger ones, invested heavily in large emerging markets — China, India, Brazil — that were hit by the global downturn but came back faster and in a more pronounced way than many people expected,” he said.
Waldman expects U.S. manufacturing growth to slacken as inventory levels return to equilibrium and global economic growth slows. “But we don’t see a global recession,” he said. “Global growth is slowing, and business equipment investment is slowing, but both seem likely to stay north of zero.”