A modest rise in consumer spending combined with an increase in business investment in both equipment and structures should help increase U.S. economic growth, according to the Manufacturers Alliance for Productivity and Innovation Quarterly Economic Forecast.
The report predicts that inflation-adjusted gross domestic product will expand 2.8 percent in 2014 and 3.2 percent in 2015. Manufacturing production is expected to fare better than the overall economy, with anticipated growth of 3.2 percent in 2014 and 4 percent in 2015.
“The economic environment we expect for the next two years is for decently strong employment growth, a falling unemployment rate and relatively low inflation,” said MAPI chief economist Daniel J. Meckstroth, Ph.D. “The fastest growth in manufacturing will come from the rebound in the housing market, particularly in wood products, furniture, nonmetallic mineral products, and electrical equipment, appliances, and components.”
Production in non-high-tech manufacturing industries is expected to increase 2.9 percent in 2014 and 3.8 percent in 2015. High-tech manufacturing production, which accounts for about 5 percent of all manufacturing, is anticipated to grow 6.8 percent in 2014 and 7.2 percent in 2015.
MAPI expects industrial equipment expenditures to advance 8.4 percent in 2014 and 10.9 percent in 2015. The outlook for spending on transportation equipment is for growth of 5.6 percent in 2014 and 4.1 percent in 2015. Spending on nonresidential structures is anticipated to improve by 3.5 percent in 2014 and 3.9 percent in 2015.
Residential fixed investment is forecast to increase by double digits in both years, by 12.5 percent this year and an even more robust 18.8 percent in 2015.
“We anticipate 1.13 million housing starts in 2014 and 1.47 million starts in 2015,” Meckstroth said. “There is pent-up demand for housing and a need for household formation. The solid increase, however, is from very low levels.”
The outlook is for an increase of 356,000 manufacturing jobs in 2014, a substantial advance from the anticipated 252,000 jobs in the December forecast, but decreasing to 197,000 jobs in 2015, a decline from 256,000 jobs in the previous report.