Recovery in factory production is outpacing overall U.S. economic growth that may be slowed by rising oil prices and government budget-cutting, the Manufacturers Alliance/MAPI said in its quarterly economic forecast.
MAPI reduced its forecast for inflation-adjusted GDP to 2.7 percent this year and by 2.9 percent next year from its February forecast of 3.2 percent in 2011 and 3 percent in 2012.
“The economy is continuing to grow at a moderate pace with consumer durable goods, business equipment, and exports leading the way,” said Daniel J. Meckstroth, MAPI chief economist. “Rising oil prices and government austerity at all levels, however, give pause to any excessive optimism.”
Manufacturing production will outpace the overall economy with 6.2 percent growth in 2011 and 4.2 percent growth in 2012, MAPI forecasts. Manufacturing is expected to add 288,000 jobs in 2011 and 374,000 jobs in 2012.
“The manufacturing recovery is solid but it has only regained half of its losses since the depths of the recession in 2007, when it fell 20 percent at its trough,” Meckstroth said. “On the positive side there is some employment growth, a need to replace and repair business equipment, and the falling dollar makes the United States competitive in supplying equipment to emerging countries for infrastructure projects.
“On the downside, federal, state and local government spending has shifted into a restraint mode, and high oil and commodity prices pose a risk,” he said. “The situation in the Middle East remains fluid and, while fears may have eased of late, there is no timeline to the endgame because of the volatile political climate.”