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Conditions Seen Volatile in Manufacturing Sector; Exports Could Provide Relief
Economy will likely experience mild recession in first half of 2008 before rebounding in last six months, Manufacturers Alliance/MAPI reports in quarterly forecast
Arlington, VA — February 14, 2008 — The housing collapse and a consumer-based recession, particularly affecting the automobile, housing related and most recently the services sectors, present significant short-term challenges to the U.S. economy, according to a new report from The Manufacturers Alliance/MAPI.
The Alliance's Quarterly Economic Forecast predicts that inflation-adjusted gross domestic product (GDP) growth will slow to 1.3 percent in 2008 before improving to 2.5 percent in 2009. GDP growth will be down an average of 0.6 percent in the first two quarters before returning to growth in the second half of 2008, MAPI projecs.
The Alliance generates its macroeconomic and industry forecasts by supplying major assumptions for the economy and running simulations through its Global Insight Macroeconomic Model.
Severe Shock
"Recessions are caused by severe shocks," said Daniel J. Meckstroth, Manufacturers Alliance/MAPI chief economist. "The housing collapse, severe decline in housing prices, record high oil prices and subprime mortgage-induced credit crunch have already caused consumer confidence to plummet and employment to fall, and economic conditions will get worse before they improve."
Meckstroth added that the tax rebate signed into law by President Bush this week, as well as the Federal Reserve's aggressive monetary policy easing, should help stimulate a recovery later this year.
According to the Alliance's projections, manufacturing production growth will show a significant decline from an already low 1.9 percent growth in 2007 to an estimated 0.5 percent in 2008, preceding a solid upswing to 3.4 percent in 2009. Still, these figures represent a slight degree of improvement from the previously anticipated flat and 2.6 percent growth, respectively, in the November 2007 MAPI forecast.
Production in non-high-tech industries is anticipated to decline 1.2 percent this year and to grow by 2.6 percent in 2009.
The Alliance's Quarterly Economic Forecast predicts that inflation-adjusted gross domestic product (GDP) growth will slow to 1.3 percent in 2008 before improving to 2.5 percent in 2009. GDP growth will be down an average of 0.6 percent in the first two quarters before returning to growth in the second half of 2008, MAPI projecs.
The Alliance generates its macroeconomic and industry forecasts by supplying major assumptions for the economy and running simulations through its Global Insight Macroeconomic Model.
Severe Shock
"Recessions are caused by severe shocks," said Daniel J. Meckstroth, Manufacturers Alliance/MAPI chief economist. "The housing collapse, severe decline in housing prices, record high oil prices and subprime mortgage-induced credit crunch have already caused consumer confidence to plummet and employment to fall, and economic conditions will get worse before they improve."
Meckstroth added that the tax rebate signed into law by President Bush this week, as well as the Federal Reserve's aggressive monetary policy easing, should help stimulate a recovery later this year.
According to the Alliance's projections, manufacturing production growth will show a significant decline from an already low 1.9 percent growth in 2007 to an estimated 0.5 percent in 2008, preceding a solid upswing to 3.4 percent in 2009. Still, these figures represent a slight degree of improvement from the previously anticipated flat and 2.6 percent growth, respectively, in the November 2007 MAPI forecast.
Production in non-high-tech industries is anticipated to decline 1.2 percent this year and to grow by 2.6 percent in 2009.
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