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The outlook for the U.S. economy is for steady growth but there is little expectation for a significant upward trajectory, according to the Manufacturers Alliance for Productivity and Innovation (MAPI) Quarterly Economic Forecast
The MAPI Foundation, the research affiliate of MAPI, released its quarterly economic forecast, predicting that inflation-adjusted gross domestic product will expand 2.2 percent in 2014 and 3 percent in 2015. The former is a decrease from 2.5 percent and the latter a decline from 3.2 percent in the previous report. GDP is forecast to grow by 3.3 percent in 2016.
Manufacturing production is expected to outpace GDP, with anticipated growth of 3.4 percent in 2014, an increase from 3.2 percent in the previous forecast, and 4 percent in 2015, no change from the prior report. Manufacturing production is anticipated to rise by 3.6 percent in 2016.
“The economy is somewhat constrained by credit availability and risk aversion,” said MAPI Foundation Chief Economist Daniel Meckstroth. “Consumers are driving growth but can’t go much faster. Business investment is the one area that can accelerate, yet firms have been reluctant to spend. There is a lot of uncertainty in the marketplace, and we seem to be inundated by negative news, such as about the EU flattening out, a worsening U.S. trade deficit and whispers that the Fed is at least thinking about raising rates.”
Production in non-high-tech manufacturing industries is expected to increase 3.2 percent in 2014, 3.8 percent in 2015 and 3.2 percent in 2016. High-tech manufacturing production, which accounts for approximately 5 percent of all manufacturing, is anticipated to grow 4.7 percent in 2014, 8.5 percent in 2015 and 10.4 percent in 2016.
The forecast for inflation-adjusted investment in equipment is for growth of 5.7 percent in 2014, 8.3 percent in 2015 and 7.2 percent in 2016. Capital equipment spending in high-tech sectors will also rise. Inflation-adjusted expenditures for information processing equipment are anticipated to increase 4 percent in 2014 and by double digits in each of the next two years—11.9 percent in 2015 and 10.2 percent in 2016.
MAPI expects industrial equipment expenditures to advance 11 percent in 2014, 8.6 percent in 2015 and 5.7 percent in 2016. The outlook for spending on transportation equipment is for growth of 7.4 percent in 2014 before declining to 1.5 percent in 2014 and 0.6 percent in 2016. Spending on nonresidential structures is anticipated to improve by 6.4 percent in 2014, 1.8 percent in 2015 and 7.2 percent in 2016. Residential fixed investment is forecast to increase 3.6 percent this year before climbing to 15.7 percent growth in 2015 and 14.9 percent in 2016.
“We anticipate 1.3 million housing starts in 2015 and more than 1.5 million starts in 2016,” Meckstroth said. “U.S. manufacturing production is 95 percent recovered from its September 2007 prerecession peak and will be fully recovered by the end of this year.”
Inflation-adjusted exports are anticipated to increase 2.7 percent in 2014, 5.1 percent in 2015 and 4.3 percent in 2016. Imports are expected to grow 3.6 percent in 2014, 5.7 percent in 2015 and 6.2 percent in 2016. MAPI forecasts overall unemployment to average 6.3 percent in 2014 before dropping to 5.7 percent in 2015 and 5.4 percent in 2016.
The outlook is for an increase of 184,000 manufacturing jobs in 2014, an upswing from the anticipated 158,000 jobs in the May forecast, and 315,000 additional jobs in 2015, an increase from 212,000 jobs in the previous report. Meckstroth envisions 86,000 manufacturing jobs to be added in 2016.
The refiners’ acquisition cost per barrel of imported crude oil is expected to average $95.60 in 2014, $93.20 in 2015 and $96.90 in 2016.