Softer Economic Data Suggests Recovery is in Slow Growth Mode
Aug 24, 2010
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The U.S. economy decelerated to a “slow growth mode,” primarily driven by consumers continuing to deleverage and rediscovering the need for thrift, according to a new report.
The Manufacturers Alliance/MAPI Quarterly Economic Forecast predicts that inflation-adjusted gross domestic product (GDP) will expand by 2.9% in 2010, followed by 2.6% growth in 2011. The forecast is down slightly from the previously estimated 3.3% for 2010 and 2.9% for 2011, in the May 2010 quarterly report.
"There is a somewhat bleaker outlook amid weaker economic data and it clearly indicates a slow growth mode,” said Daniel J. Meckstroth, Manufacturers Alliance/MAPI Chief Economist. He pointed to weaker indicators in June and said consumers are spending less. "They are saving more and repaying debt, which is good for the long run but not the near term. The inventory swing is over and the benefits of the stimulus have basically run their course.”
There are positive economic signs and the manufacturing sector should continue to hold its own. “Expenditures are rapidly growing for business equipment, as are exports,” Meckstroth added. “Manufacturing will grow faster than the general economy as it relies less on consumer spending while disproportionately benefitting from strong demand for business equipment, exports, and basic materials.”
Manufacturing production growth is expected to show 5.7% growth in 2010 and an additional 4.7% growth in 2011.
Production in non-high-tech industries is expected to increase by 5.1% in 2010 and by 4.3% in 2011.
High-tech manufacturing production is anticipated to improve at a much higher rate, with impressive 14.5% growth in 2010 followed by solid 13% growth in 2011.
The forecast for inflation-adjusted investment in equipment and software is for 14.2% growth in 2010 and for 11.6% growth in 2011.
Capital equipment spending in high-tech sectors will also continue to improve.
Inflation-adjusted expenditures for information processing equipment are anticipated to increase by 12.7% in 2010 and by 7% in 2011.
MAPI expects industrial equipment expenditures to advance by 7.3% in 2010 before surging by 18.8% in 2011.
Spending on non-residential structures is the lone GDP expenditure category expected to decline in each of the next two years, falling by 14.3% in 2010 and decreasing by 3.2% in 2011.
Exports and imports will both see gains. Inflation-adjusted exports are anticipated to improve by 12.5% in 2010 and by 8.1% in 2011. Imports are expected to grow by 11.8% in 2010 and by 6.7% in 2011.
MAPI forecasts overall unemployment to remain high, averaging 9.6% in 2010 and 9.4% in 2011.
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