Industry Groups Says Recession End in Sight

MAPI predicts 3.2% growth in manufacturing in 2010 and 5.1% growth in 2011.

As signs continue to emerge that the U.S. economy is improving, a recovery is likely to be "modest and fragile", according to a new report by the The Manufacturers Alliance/MAPI. The group predicts that inflation-adjusted gross domestic product (GDP) will decline 2.7% in 2009 before rebounding to 2.1% growth in 2010, and by 3.2% in 2011.

"We believe the economy has bottomed out and will post a 1.9% increase at an annual rate in the third quarter of 2009 and 2.5% in the fourth quarter, said Daniel J. Meckstroth, Manufacturers Alliance/MAPI Chief Economist. "The forecast for 2010 calls for a slight rebound in overall consumer spending based on slow personal income growth, and we look for continued improvement in the consumer sector in 2011.

"A swing from cutting inventory in 2009 to adding inventory in 2010 and 2011 has the impact of boosting production," he added. "Economic momentum will be enhanced as pent up demand is unleashed, especially for new housing and motor vehicles as both of these industries are rebounding form several years of exceptionally low production."

Manufacturing production growth is expected to decline 11.9% this year before rebounding to 3.2% growth in 2010 and 5.1% growth in 2011.

Production in non-high-tech industries is expected to decline by 11.8% in 2009 before increasing by 1.9% in 2010 and by 4.8% in 2011. The computers and electronics products sector, normally a consistent growth industry, will also see a drop-off this year, declining by 10.9%. High-tech industrial production, however, is expected to rebound to 8.9% growth in 2010 and by a healthy 15.4% growth in 2011.

The expenditure category for investment in equipment and software is likely to decrease by 17.4% in 2009, before experiencing 8.9% growth in 2010 and 14.5%t growth in 2011. Capital equipment spending in high-tech sectors will continue the trend. Expenditures for information processing equipment are expected to fall 8.8% in 2009 before rising by 7.2% in 2010 and by 9.1% in 2011.

The forecast expects industrial equipment expenditures to decline by a severe 22.7% this year and to further decline by 0.7% in 2010. But MAPI economists envision a significant turnaround of 20.5% growth in 2011. The outlook for spending on transportation equipment is for extremely wide swings in either direction. The analysis projects a 42.8% decline in 2009, followed by a 52.1% increase in 2010, and a 36.4% advance in 2011.

Spending on non-residential structures is expected to retrench over the next two years, declining by 17.6% in 2009, and by an additional 15.7% in 2010 before seeing growth of 1.8% in 2011.

Exports and imports will both experience a substantial downturn in 2009 before recovering. Inflation-adjusted exports are anticipated to decrease by 11.8% in 2009 before rebounding to 5.7% growth in 2010 and to 7.9% growth in 2011. Imports are expected to decline by 14% this year, to increase by 7.3% in 2010, and to further increase by 5.6% in 2011.

There will be little change in the employment outlook. The current MAPI forecast anticipates unemployment to average 9.2% in 2009, 9.9% in 2010, and 9.2% in 2011.

TAGS: Trade
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