Manufacturing Group Predicts U.S. Export Growth to Hit 8.3% in 2008

July 11, 2008
In 2009 it will be 9.7%, says MAPI.

A dramatic surge in energy prices together with elevated food and raw materials costs have created a global inflation concern, complicating the world outlook amidst continuing worries surrounding the U.S. economy and financial situation, according to a new report," MAPI Quarterly Forecast of U.S. Exports, Global Growth, and the Dollar: Third Quarter 2008 Through Fourth Quarter 2009."

Economist Cliff Waldman writes that moderate export demand has buffered the U.S. economy from a growing portfolio of risks and has been the primary reason that the much-feared emergence of a significant recession has yet to occur.

"While U.S. data have been modestly above expectations, the risk of an imminent downturn remains and the U.S. financial system is still grappling with significant structural issues," Waldman said. "Over the near term, U.S. troubles will continue to impact the growth outlook for key trading partners as well as the stability of global financial markets."

MAPI expects the growth of total U.S. goods and services export demand to accelerate modestly from 8.1% in 2007 to 8.3% in 2008. Following that, the lagged impact of a continued dollar decline should combine with stronger industrialized country growth during the second half of next year, and MAPI predicts that total U.S. export growth will accelerate to 9.7% in 2009.

Gross domestic product (GDP) growth in non-U.S. industrialized countries, which include Canada, the Eurozone (plus Denmark, the United Kingdom, and Sweden), and Japan, will grow by 1.8% during the third and fourth quarters of 2008 before slowing to 1.7% during the first half of 2009. Growth should reaccelerate, albeit to a still modest 2.1%, during the second half of 2009.

The report indicates developing country aggregate GDP growth will slow from 5.2% during the third and fourth quarters of 2008 to 5.1% during the first half of 2009. Further weakness is likely in the second half of the year, with growth expected to decelerate to 5% during the third quarter of 2009 and to 4.9% during the fourth quarter of 2009.

Waldman forecasts that the dollar will decline by 3% on a compound annual basis against the currencies of industrialized trading partners during the third and fourth quarters of 2008 and in the first quarter of 2009. The dollar depreciation will slow to 2% during the second and third quarters of 2009 before a flat performance during the fourth quarter of 2009.

Against the currencies of the developing countries, MAPI forecasts a decline of 10% during the third quarter of 2008 and then a moderation to a 7% decline during the fourth quarter of 2008 and the first quarter of 2009. MAPI expects a further decline to 5% for the last three quarters of 2009.

"Persistent weakness and continued downside risks for the U.S. economy likely mean that the dollar will continue on a path of depreciation well into 2009," Waldman added.

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