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MAPI: Pent-Up Demand Means Positive Outlook

A number of moderately positive factors point to sustained momentum for the U.S. economy and its manufacturing sector.

Projections for 2.2 Percent GDP Growth in 2012, 2.4 Percent in 2013; Risk of a Double-Dip Recession Wanes

Arlington, VA. — A number of moderately positive factors point to sustained momentum for the U.S. economy and its manufacturing sector, according to a new report.

The Manufacturers Alliance for Productivity and Innovation (MAPI) Quarterly Economic Forecast predicts that inflation-adjusted gross domestic product (GDP) will expand by 2.2 percent in 2012 and by 2.4 percent in 2013, a solid increase from 1.7 percent growth in 2011. The 2012 forecast represents a slight upgrade over the previously estimated 2.1 percent growth, while the 2013 forecast is on par with the 2.4 percent growth anticipated in MAPI’s November 2011 quarterly report.

“The forecast is a bit more optimistic and the probability of a double-dip recession has diminished,” said Daniel J. Meckstroth, Ph.D., MAPI Chief Economist. “There is pent-up demand for consumer durable goods, especially motor vehicles. In addition, business investment is improving, and not just for repair and replacement of equipment—there is also investment in expanding capacity. Global infrastructure building is an economic driver, in particular creating a demand in developing countries for U.S. construction, aerospace, and mining and drilling equipment.”

Manufacturing production will outpace the overall economy and is expected to show growth of 4.0 percent in 2012 and 3.6 percent in 2013. The 2012 figure is up from 3.4 percent and the 2013 estimate is down from 3.8 percent from the November forecast. Manufacturing is expected to see a net increase in hiring, with the sector forecast to add 210,000 jobs in 2012 and 220,000 jobs in 2013. These figures compare favorably to the November forecast of 170,000 jobs in 2012 and 140,000 jobs in 2013.

There remain some cautionary flags, however.

“The major risks will come from developments in the Eurozone and the severity of its recession, and from concerns regarding oil prices, especially with Iran,” Meckstroth said. “Iran is threatening to disrupt oil tanker traffic in the Strait of Hormuz.”

Production in non-high-tech industries is expected to increase by 3.3 percent in 2012 and by 3.1 percent in 2013. High-tech manufacturing production, which accounts for approximately 10 percent of all manufacturing, is anticipated to improve at a higher rate, with anticipated growth of 4.3 percent in 2012 and 9.3 percent in 2013.

The forecast for inflation-adjusted investment in equipment and software is for growth of 8.2 percent in both 2012 and 2013. Capital equipment spending in high-tech sectors will also rise. Inflation-adjusted expenditures for information processing equipment are anticipated to increase by 8.0 percent in 2012 and by 8.7 percent in 2013.

MAPI expects industrial equipment expenditures to advance by 14.3 percent in 2012 and by 6.0 percent in 2013. The outlook for spending on transportation equipment is for growth of 11.7 percent in 2012 and 13.3 percent in 2013. Spending on non-residential structures will improve by 5.0 percent in 2012 before decelerating to 3.1 percent in 2013.

Inflation-adjusted exports are anticipated to improve by 4.2 percent in 2012 and by 6.7 percent in 2013. Imports are expected to grow by 4.1 percent in 2012 and by 5.2 percent in 2013. MAPI forecasts overall unemployment to average 8.2 percent in 2012 and 8.0 percent in 2013.

The price per barrel of imported crude oil is expected to average $102 per barrel in 2012 and $104.80 in 2013.  



 

 

MAPI Economic Forecast

GDP Expenditure Categories

Inflation-Adjusted Percent Change

2011

2012(F)

2013(F)

Gross Domestic Product

1.7

2.2

2.4

 

Total Consumption

2.2

2.2

2.3

 

  Durables

8.1

6.0

5.2

 

  Nondurables

1.7

1.8

2.0

 

  Services

1.4

1.7

1.9

 

Nonresidential Fixed Investment

8.6

7.3

6.8

 

  Equipment & Software

10.3

8.2

8.2

 

    Information Processing Equipment

5.9

8.0

8.7

 

    Industrial Equipment

12.9

14.3

6.0

 

    Transportation Equipment

25.2

11.7

13.3

 

  Structures

4.1

5.0

3.1

 

Residential Fixed Investment

-1.4

9.4

16.4

 

Exports

6.8

4.2

6.7

 

Imports

5.0

4.1

5.2

 

Federal Government

-2.0

-1.9

-3.4

 

State & Local Government

-2.3

-1.7

-0.7

 

       

 

 

MAPI Economic Forecast

Economic Indicators

Percent Change or Level as Specified

2011

2012(F)

2013(F)

Prices (% change)

 

 

 

 

Consumer Prices

3.1

1.7

1.7

 

  Excl. Food & Energy

1.7

1.9

1.7

 

Producer Prices, Finished Goods

6.0

1.2

1.0

 

Energy ($)

 

 

 

 

Imported Crude Oil ($ per barrel)

$102.8

$102.0

$104.8

 

Natural Gas Wellhead Price ($mmbtu)

$3.8

$3.1

$3.8

 

Other Key Measures

 

 

 

 

Nonfarm Inventory Change (Billion 2005$)

$45

$59

$53

 

Light Vehicle Sales (Million units)

12.7

13.7

14.8

 

Housing Starts (Million units)

0.607

0.746

0.997

 

Federal Surplus (NIPA, Billion $)

-$1,187

-$1,004

-$752

 

Current Account Balance (Billion $)

-$473

-$524

-$510

 

Labor

 

 

 

 

Unemployment Rate (%)

9.0

8.2

8.0

 

Payroll Employment (% change)

1.2

1.5

1.6

 

Production (% change)

 

 

 

 

Manufacturing (SIC Basis)

4.5

4.0

3.6

 

   Computers & Electronic Products

7.4

4.3

9.3

 

   Non-High Tech Manufacturing

4.3   

3.3

3.1

 

            

F=Forecast

Source(s): MAPI, February 2012

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