Forecast: continued sluggish growth
The National Association of Manufacturers’ 2008 Economic Forecast released Wednesday points to, “a recession being averted, but a significant deceleration in GDP growth through the first half of this year due to surging energy prices and a slowdown in corporate profits that will hold down business spending.”
David Huether, NAM chief economist and author of the report, sees GDP growing by just 1.4% in the first half of this year after slowing from 4.9% in the third quarter of 2007 to just 2% in the fourth quarter.
“The ripple effect of the housing downturn and a slowdown in motor vehicle production has caused a significant hit to the overall manufacturing economy,” Huether said. “While these sectors shed 125,000 jobs and saw output decline by 2.4% last year, the remaining sectors picked up 18,000 jobs and output rose by 2.7%.”
Overall manufacturing output edged up by just 1.8% in 2007 %%MDASSML%% its slowest pace in four years %%MDASSML%% and is expected to continue at 1.9% in 2008, according to the report. Manufacturing employment is currently forecast to drop by 90,000 in the coming year.
“The best way create jobs is to jump start business investment with an enhanced capital-cost recovery system,” said Dorothy Coleman, the NAM’s vice president for tax and domestic economic policy. “The NAM is advocating a package of tax relief proposals geared toward economic growth. As we saw in 2003, a pro-business investment growth package can make a real difference.”
The NAM’s tax relief proposals include a 50% bonus depreciation provision for business investment. According to the report, this would nearly double the growth of business investment this year resulting in a half-percentage point added to GDP growth, faster manufacturing output and an additional 112,000 manufacturing workers by the end of this year.