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The report predicts inflation-adjusted gross domestic product (GDP) will expand by 2.8 percent in 2010, decelerate to 2.5 percent growth in 2011, and increase by 3.2 percent in 2012. The 2010 and 2011 forecasts are down slightly from the previously estimated 2.9 percent and 2.6 percent, respectively, from the August 2010 quarterly report.
The current report offers MAPI's initial forecast for 2012. By supplying major assumptions for the economy and running simulations through the IHS Global Insight Macroeconomic Model, the Alliance generates unique macroeconomic and industry forecasts.
"Consumers are deleveraging and paying off debt, and we do not believe easy credit will return in this expansion," said Daniel J. Meckstroth, Manufacturers Alliance/MAPI chief economist. "Furthermore, consumers have a pressing need to spend less than their income growth in order to rebuild the wealth needed for retirement. Faster growth outside of personal consumption expenditures causes a rebalancing of economic resources. Investment in equipment, software, and structures is expected to expand."
Manufacturing production is expected to show 5.8 percent growth in 2010, 4 percent growth in 2011, and 4.9 percent growth in 2012.
Production in non-high-tech industries is expected to increase by 5.1 percent in 2010, by 2.8 percent in 2011, and by 4 percent in 2012. High-tech manufacturing production, which accounts for approximately 10 percent of all manufacturing, is anticipated to improve at a much higher rate, with impressive 13.6 percent growth in 2010 followed by 12.3 percent growth in 2011 and by a 14.7 percent gain in 2012.
The forecast for inflation-adjusted investment in equipment and software is for 15.2 percent growth in 2010, 11.7 percent growth in 2011, and 8.2 percent growth in 2012. Capital equipment spending in high-tech sectors will also continue an upward trend. Inflation-adjusted expenditures for information processing equipment are anticipated to increase by 12.9 percent in 2010 and by 7.2 percent in 2011 before decelerating to 4.8 percent in 2012.
MAPI expects industrial equipment expenditures to advance by 6.9 percent in 2010 before surging by 20.2 percent in 2011 and by 8.2 percent in 2012.
"A higher level of factory capacity is a trigger for capital investment to repair and replace equipment, especially when corporate profits are at a very high level," Meckstroth said.
The outlook for spending on transportation equipment is for robust 60.3 percent growth in 2010, 22.7 percent in 2011, and 23.1 percent in 2012. Spending on non-residential structures will decline through 2011 before advancing in 2012. This GDP expenditure category is expected to fall by 13.8 percent in 2010, and decrease by 3.5 percent in 2011, before reversing course to 6.4 percent growth in 2012.
Exports and imports will both see gains. Inflation-adjusted exports are anticipated to improve by 11.5 percent in 2010, by 7.8 percent in 2011, and by 8.7 percent in 2012. Imports are expected to grow by 13.2 percent in 2010, by 6.1 percent in 2011, and by 4.5 percent in 2012. MAPI forecasts overall unemployment to remain high, averaging 9.7 percent in 2010, 9.5 percent in 2011 and 8.9 percent in 2012. Manufacturing is expected to see a hiring increase with the sector forecast to add 131,000 jobs in 2010, 275,000 jobs in 2011, and 300,000 jobs in 2012.
The price per barrel of imported crude oil is expected to average $76 in 2010, before heading to $83 per barrel in 2011 and to $88.50 in 2012.