Strong growth in jobs plus replacement demand for equipment from businesses will provide a stable base for overall economic growth, according to a new report.
The MAPI Foundation, the research affiliate of the Manufacturers Alliance for Productivity and Innovation, released its quarterly economic forecast, predicting that inflation-adjusted gross domestic product will expand 2.8 percent in 2015 and 3.0 percent in 2016. Both are declines from the August report—of 3.0 percent and 3.3 percent, respectively.
Manufacturing production is expected to outpace GDP, with anticipated growth of 3.5 percent in 2015 (a decrease from 4.0 percent in the previous forecast) and 3.9 percent in 2016 (an increase from 3.6 percent in the August report).
The November 2014 report forecasts a five-year horizon in which GDP is expected to average 2.8 percent and manufacturing production to average 3.26 percent growth.
“We will have full employment in 18 months and manufacturing is already there,” said MAPI Foundation Chief Economist Daniel J. Meckstroth. “With the unemployment rate continuing to fall, the pain and suffering from the recession is dissipating. Why are businesses spending? Because consumers are spending. Also, the drop in energy prices is essentially a tax cut for us. Lower prices are a positive development.”
Production in non-high-tech manufacturing is expected to increase 3.8 percent in 2015 and 3.7 percent in 2016. High-tech manufacturing production, which accounts for approximately 5 percent of all manufacturing, is anticipated to grow 8.2 percent in 2015 and 10.0 percent in 2016.
The forecast for inflation-adjusted investment in equipment is for growth of 6.9 percent in 2015 and 7.3 percent in 2016. Capital equipment spending in high-tech sectors will also rise. Inflation-adjusted expenditures for information processing equipment are anticipated to increase by double digits in each of the next two years—12.1 percent in 2015 and 12.3 percent in 2016. The MAPI Foundation expects industrial equipment expenditures to advance 7.6 percent in 2015 and 3.6 percent in 2016. Conversely, the outlook for spending on transportation equipment is for decreases of 0.8 percent in 2015 and 0.4 percent in 2016.
Spending on nonresidential structures is anticipated to improve by 2.6 percent in 2015 and 4.2 percent in 2016.Residential fixed investment is forecast to increase 10.2 percent in 2015 and 10.9 percent in 2016. Meckstroth anticipates 1.2 million housing starts in 2015 and 1.4 million in 2016.
Inflation-adjusted exports are anticipated to increase 3.3 percent in 2015 and 3.9 percent in 2016. Imports are expected to grow 3.6 percent in 2015 and 6.6 percent in 2016. The MAPI Foundation forecasts overall unemployment to average 5.6 percent in 2015 and 5.3 percent in 2016.
The outlook is for an increase of 202,000 manufacturing jobs in 2015, a decrease from 315,000 in the August report. Meckstroth envisions 16,000 manufacturing jobs to be added in 2016, down from 86,000 in the previous forecast. Over the five-year period from 2015 to 2019, the MAPI Foundation forecasts an average annual increase of 66,800 manufacturing jobs.
The refiners’ acquisition cost per barrel of imported crude oil is expected to average $80.00 in 2015 and $80.60 in 2016.