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4 Factors Drive Down Economic Forecast

4 Factors Drive Down Economic Forecast

May 22, 2015

Five months after projecting a prosperous 2015, the Manufacturers Alliance for Productivity and Innovation Foundation has revised its economic outlook downward to just 2.4 percent GDP growth for the year. That is down from MAPI's previous forecast of 3 percent for 2015 and would equal the growth of 2014.

In the organization's most recent quarterly Economic and Manufacturing Outlook, MAPI also revised down the nation's manufacturing production growth to 2.5 percent from 3.7 percent, placing 2015 a percentage point short of the 3.5 percent growth in 2014.

MAPI Chief Economist Daniel J. Meckstroth cited four factors behind the downward revisions:

  1. Oil and natural gas prices collapsed, causing a sudden contraction of the energy supply chain.
  2. The strong U.S. dollar reduced growth, a result of cheaper imports to the U.S. and U.S. exports becoming more expensive to foreign buyers, as well as deflation pressure on exports.
  3. Consumers spent some of their fuel savings in the fourth quarter of 2014.
  4. The inventory-to-sales ratio rose sharply in the first quarter, while the inventory runoff in the second quarter slowed production growth

The next couple of years don't look much better. MAPI forecasts GDP growth of 3 percent growth in 2016 and 2.7 percent growth in 2017 for the overall economy, as well as 4 percent growth in 2016 and 3.1 percent growth in 2017 for manufacturing.

The report underscored the drag that net exports continue to have on the economy, dropping GDP 0.7 percentage points in 2015. This lines up with MAPI's recent report that the U.S. deficit rose 30 percentin the first quarter as manufactured exports decreased by 2 percent to $282 billion in the first quarter as compared with 2014.

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