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Forecast: Expect Moderate Growth Through 2006

The Manufacturers Alliance/MAPI projects a moderate growth trend through 2006 for the U.S. economy and expects the manufacturing sector to slightly outpace the overall economy, but the pace of growth in both sectors is likely to decelerate somewhat in relation to a strong 2004.




The Manufacturers Alliance/MAPI Quarterly Economic Forecast predicts inflation-adjusted gross domestic product (GDP) growth to be 3.4 percent in 2005 and 3.3 percent in 2006, unchanged from the November 2004 forecast. 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.


Economic growth will transition from being primarily led by housing and consumer spending to more broad-based growth that includes business investment and exports," said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI.


Manufacturing activity should continue to grow faster than the general economy, with industrial production growth expected to increase 3.5 percent in 2005 (down from 4.1 percent in the November forecast) and industrial activity is predicted to accelerate to 3.6 percent growth in 2006 (down from 5.0 percent in November). The largest percentage gains will come in the high-tech sectors of manufacturing. Information processing equipment is expected to rise 13.4 percent in 2005 and 10.7 percent in 2006. Computers and electronic products are expected to rise 12.5 percent in 2005 and 10.7 percent in 2006.


Non-high-tech industries will grow moderately this year and next, at 4.0 percent and 3.6 percent, respectively.


Real investment in equipment and software should increase 11.1 percent in 2005 and 7.7 percent in 2006, growing several times faster than the general economy. Net exports also should contribute to economic growth. Inflation-adjusted exports should rise 5.7 percent this year and 9.9 percent next year, while imports are expected to increase at 6.1 percent in 2005 before retrenching to 3.3 percent in 2006. This is due to a continued decline in the value of the dollar, which makesU.S. goods more competitive, and stronger demand for U.S. capital equipment by the rest of the world.


The forecast also envisions the unemployment rate remaining stable at 5.2 percent in 2005 and in 2006. To view the economic forecast tables, Click Here. Use the controls at the bottom of the web page to switch between charts.


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