Aerospace Market Forecast

The Barr Group Aero Indicator
Putting it all together into one indicator, the overall trend is positive. The overall trend indicated for the next six months is an annualized growth rate of about 1.59%. In other words, at this point, we expect the aerospace industry to grow by about 0.6% during the next six months. This uptick is part of an overall upward trend starting in October of 2010. The first quarter of 2011 is predicted as a better quarter for many than the last quarter of 2010.
 

1. Aerospace Industrial Production
The year is already off to a great start, as predicted in AMD's 2011 Industry Outlook. Aerospace manufacturing and all U.S. manufacturing continued to rise right up to the end of last year, with the growth of aerospace manufacturing once again outpacing all manufacturing.

2. Aerospace Capacity Utilization
The U.S. aerospace industry continues to suffer with excess capacity. At the end of last year, capacity was significantly lower than all U.S. manufacturing. A full 30% of aerospace industrial production capacity continues to be idle, indicating a potential for growth as the economy picks up.

3. U.S. Aircraft Production Workers
While the overall U.S. economy continues to suffer from a lack of jobs, especially in manufacturing, aerospace continues to employ about the same as last year and is more than 10% higher than in 2005. The first quarter of 2011 is positioned to add more workers to our aircraft manufacturing industry as overall U.S. unemployment falls to 9% or less.

4. U.S. Air Passenger Market
The trend is strong and on the upside. The latest figures indicate a trend of 3 to 4 million more passengers flying than last year. Even though fuel prices continue to strain airline income, the trimming of the fleet and the improvement in fuel efficiency is beginning to pay off.

5. U.S. Air Cargo and Air Mail
While air cargo has been on a slide for quite some time, we finally seem to be bucking the trend. Cargo tonnage is finally back to its 2008 level with a big boost in the most current month.

6. U.S. Aerospace Net Profits
The aerospace industry is making money once again as we pulled out of a major recession. The numbers are not in yet for the fourth quarter of 2010, but they seem to hover around $4 billion. Profits grew swiftly, then leveled off after the recovery, and now seem to be set for a more traditional slow steady rise for the fourth quarter of 2010.

7. DoD Spending on Aerospace
Official DoD budgetary forecasts indicate aerospace spending to slow throughout 2011. Aircraft, aircraft engines, and parts, as well as most other areas of aerospace spending by DoD, are forecast to decline. The trend is down by 2% to 3% for the next few quarters.

8. Aerospace Trade
What best indicates our competitiveness in the global marketplace is the trade balance of exports and imports.  The steady continual trade surplus suggests U.S. manufactures of aerospace products and parts are more efficient than their international counterparts.

9. Sales of Civil Aircraft and Aircraft Engines
The indicator is a much slower pace of production than in the most recent past. Both complete civil aircraft and aircraft engine production are well below traditional averages. There is certainly excess capacity ready to be utilized.

For a free look at the numbers behind all the indicators, visit bga-aeroweb.com.

Dr. Saul “Sonny” Barr, Senior Economist at Barr Group Aerospace