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Positive signs continue to emerge for the U.S. economy as the country pivots from a recovery to expansion mode, according to the Manufacturers Alliance/MAPI Quarterly Economic Forecast. The report predicts that inflation-adjusted gross domestic product (GDP) will expand by 3.2 percent in 2011 and by 3 percent in 2012.
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The 2011 forecast represents an upgrade over the previously estimated 2.5 percent growth, while the 2012 forecast is down slightly from the 3.2 percent growth anticipated in the November 2010 quarterly report. 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.
"Prospects have improved for a stronger pace of economic growth this year, but there are no home runs," said Daniel J. Meckstroth, Ph.D., Manufacturers Alliance/MAPI chief economist. "Our 2011 forecast rose due to the additional, and unanticipated, tax stimulus passed at the end of last year. The 2 percent payroll deduction and business expensing provisions will pump an additional $300 billion into the economy over the next two years. An upward trend in the outlook for small business; the continuation and acceleration of new hiring, albeit at a somewhat sluggish pace; a rise in business confidence surveys; and a relatively strong export market all point to continued moderate economic growth."
Manufacturing production will outpace the overall economy, with expected growth of 5.5 percent in 2011 and 4.6 percent in 2012.
"Manufacturing production will improve because economic growth is strongest in the goods sector," Meckstroth said. "Consumers have pent-up needs for durable goods, such as appliances and motor vehicles; business equipment demand is strong; and a more competitive dollar helps U.S. exports."
Production in non-high-tech industries is expected to increase by 4.3 percent in 2011 and by 3.9 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 solid 14.2 percent growth in 2011 followed by 15.3 percent growth in 2012.
The forecast for inflation-adjusted investment in equipment and software is for 13.9 percent growth in 2011 and 9.6 percent growth in 2012. Capital equipment spending in high-tech sectors will also rise. Inflation-adjusted expenditures for information processing equipment are anticipated to increase by 10.3 percent in 2011 before decelerating to 5.7 percent in 2012.
MAPI expects industrial equipment expenditures to advance by a robust 19 percent in 2011 and by 9.2 percent in 2012. The outlook for spending on transportation equipment is for healthy 25.7 percent growth in 2011, and, for 2012, an even better 29.4 percent advance. Spending on non-residential structures will decline in 2011 before improving in 2012. This GDP expenditure category is expected to fall by 1.8 percent in 2011, before turning around to 5.4 percent growth in 2012.
Exports and imports will both see gains. Inflation-adjusted exports are anticipated to improve by 8.1 percent in 2011 and by 8.7 percent in 2012. Imports are expected to grow by 6.7 percent in 2011 and by 5.2 percent in 2012. MAPI forecasts overall unemployment to improve somewhat, averaging 9 percent in 2011 and 8.5 percent in 2012. Manufacturing is expected to see a hiring increase with the sector forecast to add 284,000 jobs in 2011 and 400,000 jobs in 2012.
The price per barrel of imported crude oil is expected to average $88.30 per barrel in 2011 and $92 per barrel in 2012.