Economic Forecast: Investment Spending Will Drive Growth

Manufacturing production continues to outpace overall economic growth and will be led more by investment than by consumer-driven advances over the next 18 months, according to a new report.

Arlington, VA. -- Manufacturing production continues to outpace overall economic growth and will be led more by investment than by consumer-driven advances over the next 18 months, according to a new report.

The Manufacturers Alliance for Productivity and Innovation (MAPI) Quarterly Economic Forecast predicts that inflation-adjusted gross domestic product will expand 2.5 percent in 2014 and 3.2 percent in 2015. The former is a decrease from 2.8 percent and the latter equal to the 3.2 percent from MAPI’s March 2014 report.

Manufacturing production is expected to fare better, with anticipated growth of 3.2 percent in 2014 and 4.0 percent in 2015, consistent with the previous report.

“While consumer-driven manufacturing will grow at a consistently moderate rate, the industries driven by investment will grow at a higher rate,” predicted MAPI Chief Economist Daniel J. Meckstroth, Ph.D. “Energy infrastructure and manufacturing machinery will see increases as firms replace and expand equipment. Aerospace will also experience a big ramp-up in production. In addition, there will be growth in the construction supply chain — HVAC, wood, paint, appliances, and furniture—as we anticipate both residential and nonresidential increases. The acceleration driver will be investment.”

Production in non-high-tech manufacturing industries is expected to increase 2.9 percent in 2014 and 3.7 percent in 2015. High-tech manufacturing production, which accounts for approximately 5 percent of all manufacturing, is anticipated to grow 6.6 percent in 2014 and 10.0 percent in 2015.

The forecast for inflation-adjusted investment in equipment is for growth of 5.2 percent in 2014 and 10.3 percent in 2015. Capital equipment spending in high-tech sectors will also rise. Inflation-adjusted expenditures for information processing equipment are anticipated to increase 2.7 percent in 2014 and a strong 14.6 percent in 2015.

MAPI expects industrial equipment expenditures to advance 8.1 percent in 2014 and 10.8 percent in 2015. The outlook for spending on transportation equipment is for growth of 5.6 percent in 2014 and 3.9 percent in 2015. Spending on nonresidential structures is anticipated to improve by 4.2 percent in 2014 and by 5.1 percent in 2015. Residential fixed investment is forecast to increase by 4.1 percent this year and a robust 19.9 percent in 2015.

“We anticipate 1.03 million housing starts in 2014 and 1.40 million starts in 2015,” Meckstroth said. “Manufacturing production will finally approach its 2008-2009 pre-recession peak by the end of 2014.”

Inflation-adjusted exports are anticipated to increase 3.0 percent in 2014 and 5.1 percent in 2015. Imports are expected to grow 2.1 percent in 2014 and 6.8 percent in 2015. MAPI forecasts overall unemployment to average 6.4 percent in 2014 and drop to 5.9 percent in 2015.

The outlook is for an increase of 158,000 manufacturing jobs in 2014, a decline from the anticipated 356,000 jobs in the March forecast, but increasing to 212,000 jobs in 2015, an increase from 197,000 jobs in the previous report.

The refiners’ acquisition cost per barrel of imported crude oil is expected to average $95.90 in 2014 and $93.60 in 2015. 

MAPI Economic Forecast

GDP Expenditure Categories

Inflation-Adjusted Percent Change

2013

2014(F)

2015(F)

Gross Domestic Product

1.9

2.5

3.2

Total Consumption

2.0

2.7

3.1

  Durables

6.9

5.1

6.3

  Nondurables

2.0

2.0

2.9

  Services

1.2

2.6

2.7

Nonresidential Fixed Investment

2.7

4.4

7.4

  Equipment

3.1

5.2

10.3

    Information Processing Equipment

3.4

2.7

14.6

    Industrial Equipment

3.3

8.1

10.8

    Transportation Equipment

0.4

5.6

3.9

  Intellectual Property Products

3.1

3.4

5.0

  Structures

1.3

4.2

5.1

Residential Fixed Investment

12.2

4.1

19.9

Exports

2.7

3.0

5.1

Imports

1.4

2.1

6.8

Federal Government

-5.2

-2.4

-0.5

State & Local Government

-0.2

0.3

1.0

F=Forecast

Source(s): MAPI, May 2014

 

MAPI Economic Forecast

Economic Indicators

Percent Change or Level as Specified

2013

2014(F)

2015(F)

Prices (% change)

 

 

 

  Consumer Prices

1.5

1.9

1.6

   Excl. Food & Energy

1.8

1.8

1.9

  Producer Prices, Finished Goods

1.2

2.7

0.9

Energy ($)

 

 

 

  Imported Crude Oil ($ per barrel)

$98.0

$95.9

$93.6

  Natural Gas Henry Hub Price ($mmbtu)

$3.7

$4.8

$4.5

Other Key Measures

 

 

 

  Nonfarm Inventory Change (Billion 2009$)

$58

$65

$51

  Light Vehicle Sales (Million units)

15.5

16.1

16.5

  Housing Starts (Million units)

0.929

1.026

1.404

  Federal Surplus (NIPA, Billion $)

-$752

-$651

-$613

  Current Account Balance (Billion $)

-$379

-$348

-$370

Labor

 

 

 

  Unemployment Rate (%)

7.4

6.4

5.9

  Payroll Employment (% change)

1.7

1.8

2.0

Production (% change)

 

 

 

 Manufacturing (SIC Basis)

2.6

3.2

4.0

   Computers & Electronic Products

7.0

6.6

10.0

    Non-High-Tech Manufacturing

2.3

2.9

3.7

F=Forecast

Source(s): MAPI, May 2014

The Manufacturers Alliance for Productivity and Innovation (MAPI), founded in 1933, contributes to the competitiveness of U.S. manufacturing by providing economic research, professional development, and an independent, expert source of manufacturing information. www.mapi.net
 

 

 


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