The latest economic indicators point to ongoing strength in industrial markets in 2015. In the MAPI Foundation Business Outlook, for example, the October 2014 composite index ended a run of six quarters of improvement, but still remained above the threshold that indicates expansion for manufacturing in the U.S.
MAPI’s analysis is in line with the latest Institute for Supply Management report, which also found the manufacturing sector expanded in October.
Dan Meckstroth, MAPI chief economist, said that the October ISM report should be “comforting.” "Consumer-driven manufacturing is providing a solid base for manufacturing production growth and business equipment spending is the source of acceleration. The MAPI Foundation remains confident that manufacturing industrial production will grow 4 percent in 2015 and 3.6 percent in 2016."
But while all signs point to favorable near-term conditions in the U.S. for manufacturing, MAPI’s Don Norman addressed the challenge of forecasting economic conditions over the next 12-24 months in a recent blog post.
He wrote that the paths of GDP growth, capital spending and so on can be altered by unexpected “shocks” that can’t be factored into current forecasts. “Thus, it is understandable that economic forecasts are subject to error,” he wrote. “This is why forecasts include, implicitly or explicitly, an upper and lower bound around the forecast. The idea is that there is, say, a 90 percent or 95 percent probability that the actual numbers will fall somewhere within these upper and lower bounds, or, what I like to call — borrowing from those forecasting the paths of hurricanes — the cone of uncertainty.”
The key is recognizing the importance of the data but keeping forecasts in perspective. An article from Investopedia calls business forecasting a “dangerous art” because companies tend to focus on the forecast, and thus limit their actions. Forecasts can breakdown due to "random elements" that can’t be incorporated into a model. That said, forecasts should remain on a business’ radar, helping it to plan ahead.
Bloomberg BusinessWeek recently published an article on the 2015 global forecast, and termed it a “user’s guide.” (It’s part of a broader report you should check out that looks at The Year Ahead from all angles, not just the economy.)
The magazine says that the global economy is taking longer than expected to recuperate from the “bursting of the debt bubble” in the last decade, but the U.S. is the “most likely candidate to power world growth in 2015.” What should companies do with that information? Pay attention to where opportunities may lie in 2015, BusinessWeek says, as well as where “dangers lurk.”
In the process, let Industrial Market Information help. IMI can uncover new opportunities for your business in 2015. Give us a call.
