Manufacturing Growth Will Slow To 2.3% In 2007 But Reach 3% In 2008

May 17, 2007
Manufacturers Alliance/MAPI says consumers are resilent and things will pick up at year's end.

Both the overall U.S. Gross Domestic Product (GDP) and the manufacturing sector will decelerate in 2007 before regaining a measure of strength in 2008, according to a new report by the Manufacturers Alliance/MAPI. It its quarterly report the group predicts that inflation-adjusted GDP growth will slow to 2.3% in 2007 before rebounding to 3% in 2008.

"The deceleration in economic growth is primarily a consequence of the continued housing slump, soft business investment, a surprise downshift in exports and inventory adjustment," said Daniel J. Meckstroth, Manufacturers Alliance/MAPI chief economist. "There are already signs of a rebound in business activity.The American consumer is resilient, the inventory correction has run its course, and fundamentals remain strong for export growth. We expect growth to pick up the pace in the second half of 2007."

Manufacturing production growth will experience a more pronounced deceleration this year, trending downward from 4.7% growth in 2006 to 2.1% growth in 2007, according to the report.

Spending for computers and electronic products is forecast to rise a solid 13.6% in 2007 and 13.0% in 2008. Production in non-high-tech industries will grow by a far more modest 0.8% this year and 2.3% in 2008.

Large percentage gains in spending, at least relative to the overall economy, will come in the high-tech sectors. Expenditures for information processing equipment are expected to rise 7.1% in 2007 and 6.9% 2008. But, investment in equipment and software should decelerate to 2% growth in 2007 before posting 5% growth in 2008. Industrial equipment expenditures will increase 1.1% in 2007 before declining by 2.3% in 2008. And transportation equipment will see a 6.7% decline this year before experiencing an 8.2% growth in 2008.

Exports should rise 6.4% in 2007 and 9.4% in 2008, while imports are expected to increase 2.5% in 2007 and 5.3% next year.

The forecast for the unemployment rate remains low, at 4.6% in 2007 and 4.7% in 2008.

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