Consumer spending and business investment should help increase U.S. economic growth in 2014 and 2015, according to the latest quarterly economic forecast from the Manufacturers Alliance for Productivity and Innovation (MAPI).
MAPI increased its forecast for U.S. gross domestic product (GDP) growth to 2.8% in 2014, up from its December 2013 prediction of 2.6%. The research organization maintained its GDP forecast of 3.2% for 2015.
Manufacturing will grow faster than the overall U.S. economy, according to MAPI. It expects manufacturing production to increase 3.2% in 2014 and 4.0% in 2015.
“The economic environment we expect for the next two years is for decently strong employment growth, a falling unemployment rate and relatively low inflation,” said MAPI Chief Economist Daniel J. Meckstroth. “The fastest growth in manufacturing will come from the rebound in the housing market, particularly in wood products, furniture, nonmetallic mineral products, and electrical equipment, appliances, and components.”
The fastest growth in the manufacturing sector will be among high-tech companies, said MAPI. High-tech manufacturing production, which accounts for about 5% of all manufacturing, is expected to grow 6.8% in 2014 and 7.2% in 2015. Production in non-high-tech manufacturing industries should increase by 2.9% in 2014 and 3.8% in 2015, MAPI predicted.
Companies will be increasing their spending on equipment and information technology. MAPI forecasts inflation-adjusted investment in equipment to grow 6.5% in 2014 and 9.8% in 2015. Inflation-adjusted expenditures for information processing equipment are anticipated to increase 5.7% in 2014 and ratchet up to 14.7% in 2015.
MAPI expects industrial equipment expenditures to advance 8.4% in 2014 and 10.9% in 2015. The outlook for spending on transportation equipment is for growth of 5.6% in 2014 and 4.1% in 2015. Spending on nonresidential structures is anticipated to improve by 3.5% in 2014 and 3.9% in 2015.
Residential fixed investment is forecast to increase by double digits in both years, by 12.5% this year and an even more robust 18.8% in 2015.
“We anticipate 1.13 million housing starts in 2014 and 1.47 million starts in 2015,” Meckstroth said. “There is pent-up demand for housing and a need for household formation.”
MAPI’s forecast closely resembles the 1.15 million starts predicted by the National Association of Home Builders, a 24.5% increase from the 2013 total of 928,000 units.
Exports are anticipated to increase 5.1% in 2014 and 4.3% in 2015, MAPI said. Imports are expected to grow 3.3% in 2014 and 6.9% in 2015. MAPI forecasts overall unemployment to average 6.4% in 2014 and drop to 5.8% in 2015.
MAPI expects manufacturers to add 356,000 jobs in 2014, or an average of nearly 30,000 a month. That is a substantial increase from the December forecast of 252,000 manufacturing jobs. However, MAPI now expects manufacturing to add 197,000 jobs in 2015, a decline from 256,000 jobs in the previous report.