The 2020 Mid-Year Economic Update_long

Forecast: Economy Should Gradually Improve Through End of Year

Despite a soft first quarter, the U.S. economy should gradually improve through the end of the year, according to the Manufacturers Alliance/MAPI Quarterly Industrial Outlook, a report that analyzes 27 major industries.


Manufacturing industrial production expanded at a 0.9 percent annual rate in the first quarter 2007, but the MAPI forecast envisions an improved 3 percent growth rate in the second quarter.&nbsp ; For the year as a whole, though, the report predicts that manufacturing production growth will decelerate from the 4.7 percent recorded in 2006 to 2.1 percent growth in 2007, before rebounding to 3.3 percent growth in 2008.

The manufacturing inventory correction is over, the inexplicable decline in exports has passed, the January 1, 2007, EPA diesel ...

Despite a soft first quarter, the U.S. economy should gradually improve through the end of the year, according to the Manufacturers Alliance/MAPI Quarterly Industrial Outlook, a report that analyzes 27 major industries.

Manufacturing industrial production expanded at a 0.9 percent annual rate in the first quarter 2007, but the MAPI forecast envisions an improved 3 percent growth rate in the second quarter.&nbsp ; For the year as a whole, though, the report predicts that manufacturing production growth will decelerate from the 4.7 percent recorded in 2006 to 2.1 percent growth in 2007, before rebounding to 3.3 percent growth in 2008.

The manufacturing inventory correction is over, the inexplicable decline in exports has passed, the January 1, 2007, EPA diesel engine emissions regulation is in effect, and the worst of the housing collapse has occurred,” said Daniel J. Meckstroth, Manufacturers Alliance/MAPI chief economist and author of the analysis. “As long as the general economic expansion continues, conditions in manufacturing will improve.

In a sign that manufacturing leveled off in the early part of 2007, first quarter figures show that 16 of the 27 industries tracked in the report had inflation-adjusted new orders or production above the level of one year ago, down from 18 industries that reported growth in the previous quarter.&nbsp ; &nbsp ;

While no sector group distinguished itself as an economic leader, a number of individual industries showed strong double-digit year-over-year growth, including communications equipment (20 percent); navigation, measuring, electromedical, and control instruments (17 percent); aerospace products and parts (14 percent); and industrial machinery (14 percent).

Consumer-oriented industries remain the weakest industrial sector, with housing activity plummeting by 31 percent in first quarter 2007.&nbsp ; In the equipment industry, ventilation, heating, air conditioning, and commercial refrigeration equipment declined by 11 percent.

Meckstroth concludes that six industries are in the accelerating growth (recovery) phase of the business cycle; 11 are in the decelerating growth (expansion) phase; five industries appear to be in the accelerating decline (either early recession or mid-recession) phase; and five are in the decelerating decline (late recession or very mild recession) phase of the cycle.

The report also offers economic forecasts for 24 of the 27 industries for 2007 and 2008.&nbsp ;
The MAPI forecast series predicts aerospace products and parts as the one industry to see double-digit growth in both 2007 and 2008, with expected growth each year of 14 percent. &nbsp ;

MAPI envisions two other industries to see double-digit growth in at least one of these years.&nbsp ; Communications equipment should continue its strong showing in 2007, with anticipated growth of 17 percent, followed by 9 percent growth in 2008.&nbsp ; Mining, oil, and gas field machinery is forecast to grow by 5 percent in 2007 and by a robust 12 percent in 2008.

Two industries are forecast to have negative change in both 2007 and in 2008.&nbsp ; Construction machinery could decline by 9 percent in 2007 and by 1 percent in 2008, while the household appliance industry is forecast to decline by 9 percent and by 3 percent, respectively.

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