A confluence of factors, including falling oil and natural gas prices, dollar appreciation and consumers pulling back spending, has tempered the U.S. economic outlook for 2015, according to the Manufacturers Alliance for Productivity and Innovation Quarterly Economic Forecast.
The MAPI Foundation, the research affiliate of the Manufacturers Alliance for Productivity and Innovation, released its quarterly economic forecast, predicting that inflation-adjusted gross domestic product will expand 2.4 percent in 2015, down from 3 percent in the February 2015 report, before rebounding to 3 percent in 2016, an increase from 2.7 percent in the previous forecast.
Manufacturing production is expected to outpace GDP but only slightly, with anticipated growth of 2.5 percent in 2015 (a decrease from 3.7 percent in the previous forecast) and 4 percent in 2016 (an upswing from 3.6 percent in the February report).
“Consumers seemed to have spent their fuel savings from the drop in oil prices in the fourth quarter of 2014,” said MAPI Foundation Chief Economist Daniel J. Meckstroth. “We expected some residual strength that does not seem to be there, and there is no indication we will see a surge in consumer spending. People are paying down debt and saving more rather than spending.”
"In addition, the dollar appreciated by 20 percent in a short period of time, making imports cheaper and exports more expensive," Meckstroth added. "Businesses have been cutting prices to keep market share up for foreign customers, hurting profits and investments. And with oil prices dropping by 50 percent in the fourth quarter, drilling activity has plummeted, affecting jobs and the energy supply chain."
Production in non-high-tech manufacturing is expected to increase 2.4 percent in 2015, 3.2 percent in 2016 and 2.9 percent in 2017. High-tech manufacturing production, which accounts for approximately 5 percent of all manufacturing, is anticipated to grow 4.7 percent in 2015, 9.1 percent in 2016 and 8.3 percent in 2017.
The forecast for inflation-adjusted investment in equipment is for growth of 6.1 percent in 2015, 9.6 percent in 2016 and 6.1 percent in 2017. Capital equipment spending in high-tech sectors will also rise. Inflation-adjusted expenditures for information processing equipment are anticipated to increase by 7.7 percent in 2015, a robust 13 percent in 2016 and 8.3 percent in 2017. The MAPI Foundation expects industrial equipment expenditures to advance 5.2 percent in 2015, 13.1 percent in 2016 and 8.5 percent in 2017. Spending on transportation equipment is forecast to increase 7.3 percent in 2015 and 0.8 percent in 2016, but remain flat in 2017.
Spending on nonresidential structures is anticipated to decrease by 6.6 percent in 2015 before rebounding to growth of 3.9 percent in 2016 and 7.9 percent in 2017. Residential fixed investment is forecast to increase 7.4 percent in 2015, 12.7 percent in 2016 and 9.2 percent in 2017. Meckstroth anticipates nearly 1.1 million housing starts in 2015, 1.3 million in 2016 and 1.5 million in 2017.
A strong dollar continues to be a challenge; Meckstroth expects trade will be a net drag on the U.S. economy over the next few years. Inflation-adjusted exports are anticipated to increase only 1.5 percent in 2015, 4.5 percent in 2016 and 4.3 percent in 2017. Meanwhile, imports are expected to grow 5.5 percent in 2015, 8.1 percent in 2016 and 6 percent in 2017. The MAPI Foundation forecasts overall unemployment to average 5.4 percent in 2015, 5 percent in 2016 and 4.9 percent in 2017.
The manufacturing sector added 210,000 jobs in 2014. The outlook is for an increase of 180,000 jobs in 2015, a drop from 282,000 anticipated in the February report. Meckstroth envisions only 33,000 manufacturing jobs to be added in 2016, a significant decrease from 162,000 in the previous forecast. He anticipates modest growth of 30,000 jobs in 2017.
The refiners’ acquisition cost per barrel of imported crude oil is expected to average $53.80 in 2015, $61.70 in 2016 and $67.50 in 2017.