The Manufacturers Alliance/MAPI projects solid growth in the next two years for the U.S. economy and expects the manufacturing sector to continue to outpace the overall economy. But the pace of growth is likely to decelerate, in relation to 2004, at least in the next year.
The Manufacturers Alliance/MAPI Quarterly Economic Forecast predicts inflation-adjusted gross domestic product (GDP) growth to be 3.9 percent in 2004 and 3.4 percent in 2005. The new prediction for 2004 is down from 4.5 percent in the August forecast, while the new 2005 outlook is down from 3.7 percent in the August outlook. The November forecast looks at 2006 for the first time and predicts GDP growth to be 3.3 percent in 2006. By supplying major assumptions for the economy and running simulations through the Global Insight Macroeconomic Model, the Manufacturers Alliance/MAPI generates unique macroeconomic and industry forecasts.
'The surge in oil and other commodity prices and rising penetration from imported goods is taking its toll on the industrial sector,' said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI. 'Economic growth and industrial activity will now grow more slowly than we previously expected for the rest of this year and in the first half of 2005. We continue to expect that business capital investment will be an important contributor to economic growth'a sign that business is confident about future business prospects. We also expect to see growth in exports that are faster than for imports in 2005 and 2006, and this will stabilize the trade deficit.'
Manufacturing activity should continue to grow faster than the general economy, with industrial production growth expected to increase 5.2 percent in 2004 (down from 6.0 percent forecast in the August projections) and 4.1 percent in 2005 (down from 5.7 percent in the August forecast). Industrial activity is predicted to accelerate to 5.0 percent growth in 2006. The largest percentage gains will come from a rebound in the high-tech sectors of manufacturing. Computers and electronic products are expected to rise 17.3 percent in 2004 and 13.7 percent in 2005. Non-high-tech industries will grow moderately this year and next, at 4.0 percent and 3.3 percent, respectively.
Real investment in equipment and software should increase 11.6 percent in 2004, 9.3 percent in 2005, and 8.1 percent in 2006, growing several times faster than the general economy. Net exports also should contribute to economic growth. Inflation-adjusted exports should rise 8.3 percent this year and 8.0 percent next year, while imports are expected to increase at a more moderate 9.5 percent in 2004 and 5.2 percent in 2005. This is partially due to expected depreciation of the dollar.
The forecast also envisions the unemployment rate remaining relatively stable, averaging 5.5 percent in 2004, 5.3 percent in 2005, and 5.4 percent in 2006. To view the economic forecast tables, Click Here. Use the buttons at the bottom of the page to view more data.