News

Posted On: 03/09/2010

MAPI quarterly economic forecast: Moderate recovery underway

The Manufacturers Alliance

A number of positive trends are emerging as the United States digs itself out of the “Great Recession,” but there remain cautionary signals that growth will be muted and the rebound restrained, according to a new report.

The Manufacturers Alliance/MAPI Quarterly Economic Forecast predicts that inflation-adjusted gross domestic product (GDP) will experience 2.8% growth in 2010, followed by 3% growth in 2011. By supplying major assumptions for the economy and running simulations through the IHS Global Insight Macroeconomic Model, the Alliance generates unique macroeconomic and industry forecasts.

A number of factors are in play during the recovery: the consumer, though still burdened by feeble income and job growth, will receive some relief via transfer payments and tax cuts that in turn will boost spending; parts of investment — most notably in transportation equipment, information technology, and residential housing — will increasingly provide the demand surge needed to sustain production growth; the swing in business inventories will provide growth momentum as firms reduce destocking and eventually rebuild inventories; and federally funded stimulus outlays will contribute to the government spending stream through 2011.

Manufacturing production growth declined 11.2% in 2009 and is expected to rebound to 5.4% growth in 2010, and to an additional 5.3% growth in 2011.

Production in non-high-tech industries is expected to increase by 3.3% in 2010 and by 4.8% in 2011. High-tech manufacturing production is anticipated to improve significantly, with solid 14.6% growth in 2010 followed by robust 17.8% growth in 2011.

The forecast for inflation-adjusted investment in equipment and software is for 9.4% growth in 2010 and for 12.1% growth in 2011. Capital equipment spending in high-tech sectors will continue the improving trend. Inflation-adjusted expenditures for information processing equipment are anticipated to rise by 8.1% in 2010 and to increase by 6.7% in 2011.

MAPI expects industrial equipment expenditures to improve by 6% in 2010 and by 17% in 2011. The outlook for spending on transportation equipment is for a healthy 50.1% increase in 2010 and a 33.6% advance in 2011. These figures should help compensate for a 48.7 decline in 2009.

Spending on non-residential structures is the lone GDP expenditure category expected to retrench in each of the next two years, declining by 14.6% in 2010 before decreasing further, by 6.2% , in 2011.

Exports and imports will both be trending upwards. Inflation-adjusted exports are anticipated to improve by 9.2% in 2010 and by 7.6% in 2011. Imports are expected to grow by 9.6% in 2010 and by 6.8% in 2011. The employment outlook, unfortunately, will continue to pose a challenge. MAPI forecasts unemployment to average 10% in 2010, and 9.4% in 2011.

The price per barrel of imported crude oil is expected to average $72.60 in 2010 before heading even higher, to $77.50 per barrel, in 2011. While expensive by historical standards, this still compares favorably to the average $92.30 price per barrel in 2008.