Medical and Automotive
Output of Medical Supplies and Equipment Still Strong
The total U.S. output of medical equipment and supplies expanded by 4 percent in the third quarter when compared with the same quarter in 2012. That would be pretty decent growth for most industries at this stage of the recovery, but for the medical industry it means that the growth in overall production levels is decelerating. Total output of these products grew by 6.5 percent for all of 2012, and the rate of expansion was 7 percent through the first half of this year.
Our forecast calls for a gain of at least 6 percent in 2013, but the trend of gradual deceleration in the growth rate will persist through most of next year. Our current forecast calls for a rise of 3 percent in 2014. As the chart shows, this industry follows a cyclical pattern with peaks and troughs timed at about two years apart. This suggests that the next cyclical peak in the growth rate will occur in the middle of 2015. The good news is that while the growth rate may fluctuate on a cyclical basis, the cyclical lows have never been severe, even during recessions. On average, this industry has grown by a solid 4 percent per year since 2001.
The long-term demographic trends in the U.S. suggest that this industry will continue to grow at a solid rate for the foreseeable future. The most significant factor in the short term will likely be Obamacare. If things go as planned (a scenario that seems highly unlikely at the present time), then the impact of Obamacare on this data will likely start to appear in 2015, about the same time as the next expected cyclical peak in the data.