The U.S. economy has begun the process of rebalancing away from excessive reliance on consumer spending and housing activity towards growth spurred by investment and exports, according to a new report.
The Manufacturers Alliance/MAPI Quarterly Economic Forecast predicts that inflation-adjusted gross domestic product (GDP) will expand by 2.8 percent in 2010, decelerate to 2.5 percent growth in 2011, and increase by 3.2 percent in 2012. The 2010 and 2011 forecasts are down slightly from the previously estimated 2.9 percent and 2.6 percent, respectively, from the August 2010 quarterly report. The current report offers MAPI’s initial forecast for 2012. By supplying major assumptions for the economy and running simulations through the IHS Global Insight Macroeconomic Model, the Alliance generates unique macroeconomic and industry forecasts.
“Consumers are deleveraging and paying off debt, and we do not believe easy credit will return in this expansion,” said Daniel J. Meckstroth, Manufacturers Alliance/MAPI Chief Economist. “Furthermore, consumers have a pressing need to spend less than their income growth in order to rebuild the wealth needed for retirement. Faster growth outside of personal consumption expenditures causes a rebalancing of economic resources. Investment in equipment, software, and structures is expected to expand. Another driver of growth is exports. The decline in the value of the dollar and strong growth in emerging economies allows domestic firms to expand foreign sales.”
Manufacturing production is expected to show 5.8 percent growth in 2010, 4 percent growth in 2011, and 4.9 percent growth in 2012.
Production in non-high-tech industries is expected to increase by 5.1 percent in 2010, by 2.8 percent in 2011, and by 4 percent in 2012. High-tech manufacturing production, which accounts for approximately 10 percent of all manufacturing, is anticipated to improve at a much higher rate, with impressive 13.6 percent growth in 2010 followed by 12.3 percent growth in 2011 and by a 14.7 percent gain in 2012.
The forecast for inflation-adjusted investment in equipment and software is for 15.2 percent growth in 2010, 11.7 percent growth in 2011, and 8.2 percent growth in 2012. Capital equipment spending in high-tech sectors will also continue an upward trend. Inflation-adjusted expenditures for information processing equipment are anticipated to increase by 12.9 percent in 2010 and by 7.2 percent in 2011 before decelerating to 4.8 percent in 2012.
MAPI expects industrial equipment expenditures to advance by 6.9 percent in 2010 before surging by 20.2 percent in 2011 and by 8.2 percent in 2012.
“A higher level of factory capacity is a trigger for capital investment to repair and replace equipment, especially when corporate profits are at a very high level,” Meckstroth said.
The outlook for spending on transportation equipment is for robust 60.3 percent growth in 2010, 22.7 percent in 2011, and 23.1 percent in 2012. Spending on non-residential structures will decline through 2011 before advancing in 2012. This GDP expenditure category is expected to fall by 13.8 percent in 2010, and decrease by 3.5 percent in 2011, before reversing course to 6.4 percent growth in 2012.
Exports and imports will both see gains. Inflation-adjusted exports are anticipated to improve by 11.5 percent in 2010, by 7.8 percent in 2011, and by 8.7 percent in 2012. Imports are expected to grow by 13.2 percent in 2010, by 6.1 percent in 2011, and by 4.5 percent in 2012. MAPI forecasts overall unemployment to remain high, averaging 9.7 percent in 2010, 9.5 percent in 2011 and 8.9 percent in 2012. Manufacturing is expected to see a hiring increase with the sector forecast to add 131,000 jobs in 2010, 275,000 jobs in 2011, and 300,000 jobs in 2012.
The price per barrel of imported crude oil is expected to average $76 in 2010, before heading to $83 per barrel in 2011 and to $88.50 in 2012.
MAPI recently celebrated 75 years of service to members. Originally known as the Machinery and Allied Products Institute, MAPI was formed as a result of the Depression-era National Industrial Recovery Act to help stabilize the industry at a time of unprecedented stress. Although the original government-driven mandate soon fell by the wayside, industrial leaders saw the value of working together to share insights with their peers. A mandate of executive education and business research came out of the original experience of working to bring industry out of the depths of the most severe recession of modern times.
Seventy-five years later, MAPI retains its original acronym and still is devoted to serving manufacturers through a focused program of economic research and peer learning. Our programs are targeted to and led by senior executives drawn from the more than 500 companies in our membership. Our Council program remains unique in its focus and in the way it serves senior corporate and operations executives.
MAPI Councils emphasize peer-to-peer learning and radically limit the participation of third parties. In this era of extremely compressed and stressed schedules, our programs are designed to make efficient use of executives' time. Robust member websites allow members to learn and interact year round, in addition to biannual face-to-face meetings.
Our research program serves the complex requirements of executives operating in a globally competitive environment. We provide forecasting for 24 industrial sectors of the U.S. economy, as well as numerous sectors in Latin America and Europe. Our global cost of manufacturing series provides practical benchmark data and tools to support members' plant location decisions. We also assist members with finding answers to tough benchmarking questions by utlizing our network of more than 2,000 Council members. Our work is increasingly recognized as cutting-edge by our members and by other opinion leaders.
MAPI's core mission of executive education and practical economic research has not changed significantly over the last 75 years, but the way it is shaped and delivered has changed. Our Council program has grown by 50 percent in the last six years and the number of corporate members by about 40 percent. We remain committed to continuous improvement in our services to keep pace with the ever-changing business environment. We look forward to working with new and long-time MAPI members by learning together, perfecting the art of idea-sharing, and finding solutions to common problems and thus helping our members meet the global competitive challenges.
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