Aerospace Market Forecast

Barr Group Aero Indicator
The world of aerospace continues to be important to U.S. and world economic recovery. Both cargo and passenger traffic is well above 2011 levels. Aerospace, in the midst of a troubling world economy, continues to run lean and efficient, growing despite all the negative hype of media pundits. Big DoD budget cuts are in the works and global oil prices are falling.
 

Since the index hit a high of more than 105 during the middle of last year, it continues to fall. During January 2012 and February 2012, it was below 100, during March 2012 to May 2012, the indicator rose to 102.35, meaning the sector should grow at a 2.35% annual rate. The defense side is contracting while the commercial side is expanding. You can expect growth for the rest of 2012.

1. Aerospace Industrial Production
From a low of 94.93 to 106.10 in April 2012, Aerospace manufacturing is up at an annual rate of 11.76%. This is way above the reading of only 95.66 for all U.S. manufacturing. Aerospace products and parts continue to be one of the healthiest sectors in the United States.

2. Aerospace Capacity Utilization
While capacity utilized in U.S. aerospace plants was a mere 71.42% a year ago, they rose steadily all year to 78.17 in April 2012, up more than 9.4% at an annual rate. This is slightly below the 78.40% rate for all U.S. manufacturing.

3. U.S. Aircraft Production Workers

While the country still suffers from high unemployment, aerospace manufacturing continues to add jobs. Jobs fell from 516.7 thousand in 2000 to 441.1 thousand in 2004, but the latest figures show 495.4 thousand for January 2012.

4. U.S. Aircraft Passenger Market
Passenger traffic is cyclical as are the seasons, so the best comparison is against a year ago. The latest figures out on May 29, 2012, show year-over-year increases from 2/2011 to 2/2012 of 6.5%.

5. U.S. Air Cargo and Air Mail
Cargo volumes like passenger traffic are cyclical, so again the best comparison is year-over-year. The latest data released on May 29, 2012, shows an increase of 5.18% from 2/2011 to 2/2012.

6. U.S. Aerospace Net Profits
Investors are reluctant to invest in aerospace as many speculate major DoD cuts, which Barr Group Aerospace does not believe will happen. We expect DoD aerospace spending to flatten but not fall during the next few years. In Q4 2011, aerospace profits of large firms fell only slightly compared to Q4 2010 but at smaller firms, a negative $17 million turned into a positive $48 million during the same period.

7. DoD Spending and Aerospace

FY2012 change to FY2013 forecasts to fall by nearly 5% – O&M down about 4%, procurement down about 10%, RDT and E down 3.13%, MILPERS down 2.57%, and MILCON down 15.79%.

8. Aerospace Trade
The latest figures continue to report exports at 2½ times imports as a growing industry continues to both import and export more.

9. Sales of Civil Aircraft and Engines
Barr Group Aerospace recently released the following forecast, in part based upon data supplied by the Aerospace Industries Association (AIA). Civil sales will rise by 3.2% in 2012, NASA and other government agency sales will fall by 4.9% in 2012, DoD sales will fall by less than 0.1%.

The aerospace manufacturing sector, unless otherwise noted, is NAICS3364 numbers.

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