Manufacturing recovery 'modest and fragile'

MAPI report shows slow, steady emergence from recession

08/26/2009


As signs continue to emerge that the U.S. economy is improving, a recovery from the worst recession since World War II is likely to be "modest and fragile", according to a new report.
The Manufacturers Alliance/MAPI Quarterly Economic Forecast predicts that inflation-adjusted gross domestic product will decline 2.7% in 2009 before rebounding to 2.1% growth in 2010, and by 3.2% in 2011. The GDP forecast for 2009 in the current MAPI report is marginally better than the previously anticipated 2.9% decline for this year projected in the May 2009 release. 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.
"We believe the economy has bottomed out and will post a 1.9% increase at an annual rate in the third quarter of 2009 and 2.5% in the fourth quarter," said Daniel J. Meckstroth, Manufacturers Alliance/MAPI Chief Economist. "The forecast for 2010 calls for a slight rebound in overall consumer spending based on slow personal income growth, and we look for continued improvement in the consumer sector in 2011.
"A swing from cutting inventory in 2009 to adding inventory in 2010 and 2011 has the impact of boosting production," he added. "Economic momentum will be enhanced as pent up demand is unleashed, especially for new housing and motor vehicles as both of these industries are rebounding form several years of exceptionally low production."
Manufacturing production growth is expected to decline 11.9% this year before rebounding to 3.2% growth in 2010 and 5.1% growth in 2011.
Production in non-high-tech industries is expected to decline by 11.8% in 2009 before increasing by 1.9% in 2010 and by 4.8% in 2011. The computers and electronics products sector, normally a consistent growth industry, will also see a drop-off this year, declining by 10.9%. High-tech industrial production, however, is expected to rebound to 8.9% growth in 2010 and by a healthy 15.4% growth in 2011.



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