WASHINGTON – The economy is currently at a low point and indications are that it will show only a slight increase in the second half of 2007, according to the May 2007 Economic Outlook from the National Association of Manufacturers (NAM).
The report, an update from the 2007 Economic Report released in January, reports that the economy will grow by 2.3 percent in the second quarter before accelerating to 2.7 and 3.2 percent growth in the third and fourth quarter respective. Overall, the economy is forecast to grow by 2.4 percent.
For 2007, manufacturing output will grow by 2.2 percent, its slowest pace since 2003.
“An improved trade picture and positive consumer spending will continue to be offset by a downturn in housing, pullbacks in inventories and sluggish business investment, notably in industrial equipment,” said David Huether, the NAM’s chief economist.
“With the dollar at its lowest level since mid-1997 and solid economic growth taking place abroad, exports should continue to rise,” Huether said.
In 2007, exports are expected to increase by 5.4 percent and imports by only 3.3 percent, allowing the trade deficit to decrease by $61 billion this year.
“However, when new houses aren’t going up very quickly, neither is the economy,” he said. “The ongoing downturn in housing will significantly impact some manufacturing sectors including wood products, non-metallic minerals, furniture and textile products.” Each of these sectors has experienced declines for the last three quarters, something that Huether expects to continue.
According to the report, the impact of housing will be felt on the job market where 140,000 will be lost in construction and 100,000 in manufacturing in 2007.
“The job losses in manufacturing are part of the trickle down impact of the housing decline,” Huether said. “The majority of the losses will be concentrated in transportation products and other durable sectors closely connected with construction.”
Click here to view NAM’s May 2007 Economic Outlook