The U.S. manufacturing sector should experience growth that is in-line with that of the overall economy next year, helped in part by ongoing improvement in the trade environment, the National Association of Manufacturers said in its 2007 Economic Outlook.
“After slowing to a ‘below-potential’ pace in recent quarters, the economy will continue decelerating toward a ‘soft landing’ in the coming year,” said David Huether, chief economist for the NAM. “Residential housing continues to be a drag on the economy, though outside of this sector the economy has shown solid growth."
He said continuing improvement in trade - with exports on the rise - and growth in business investment will allow industrial output to grow in lockstep with the overall economy. Huether sees the manufacturing sector growing by 2.8 percent in 2007, just below the 2.9 percent overall growth in Gross Domestic Product, and then by 2.7 percent in 2008.
“A downturn in housing will continue to (impact) the economy throughout the first half of 2007,” Huether said. “This translates into continued negative effects on specific manufacturing sectors; wood and textile products and nonmetallic minerals."
He said business spending is likely to cool from the torrid pace of 2006 as profit growth contracts, but he predicts still-respectable 6.4 percent growth in business spending next year.
“International trade also continues to buoy the economy as exports are on pace to outpace imports for three out of the past four years,” Huether said. “The combination of a more-competitive dollar and strong growth abroad will help the trade deficit decline from a high of 5.9 percent of GDP in 2006 to 5.4 percent by 2008.
In the labor market, 1.3 million new jobs will be created in 2007, although this is down from the 1.7 million jobs in 2006. Manufacturing employment will decrease slightly to 14.1 million in 2007 from 14.2 million in 2006.
For the full 2007 NAM Economic Forecast visit: http://www.nam.org/2007economicforecast