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A confluence of factors, including falling oil and natural gas prices, dollar appreciation, and consumers pulling back spending, has tempered the U.S. economic outlook for 2015, according to a new forecast.
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 2.4% in 2015, down from 3.0% in the February 2015 report, before rebounding to 3.0% in 2016, an increase from 2.7% in the previous forecast.
Manufacturing production is expected to outpace GDP but only slightly, with anticipated growth of 2.5% in 2015 (a decrease from 3.7% in the previous forecast) and 4.0% in 2016 (an upswing from 3.6% in the February report).
"Consumers seemed to have spent their fuel savings from the drop in oil prices in the fourth quarter of 2014," said MAPI Foundation Chief Economist Daniel J. Meckstroth, Ph.D. "We expected some residual strength that does not seem to be there, and there is no indication we will see a surge in consumer spending. People are paying down debt and saving more rather than spending.
"In addition, the dollar appreciated by 20% in a short period of time, making imports cheaper and exports more expensive," he added. "Businesses have been cutting prices to keep market share up for foreign customers, hurting profits and investments. And with oil prices dropping by 50% in the fourth quarter, drilling activity has plummeted, affecting jobs and the energy supply chain."
Production in non-high-tech manufacturing is expected to increase 2.4% in 2015, 3.2% in 2016, and 2.9% in 2017. High-tech manufacturing production, which accounts for approximately 5% of all manufacturing, is anticipated to grow 4.7% in 2015, 9.1% in 2016, and 8.3% in 2017.
The forecast for inflation-adjusted investment in equipment is for growth of 6.1% in 2015, 9.6% in 2016, and 6.1% in 2017. Capital equipment spending in high-tech sectors will also rise. Inflation-adjusted expenditures for information processing equipment are anticipated to increase by 7.7% in 2015, a robust 13.0% in 2016, and 8.3% in 2017. The MAPI Foundation expects industrial equipment expenditures to advance 5.2% in 2015, 13.1% in 2016, and 8.5% in 2017. Spending on transportation equipment is forecast to increase 7.3% in 2015 and 0.8% in 2016 but remain flat in 2017.
Spending on nonresidential structures is anticipated to decrease by 6.6% in 2015 before rebounding to growth of 3.9% in 2016 and 7.9% in 2017. Residential fixed investment is forecast to increase 7.4% in 2015, 12.7% in 2016, and 9.2% in 2017. Meckstroth anticipates nearly 1.1 million housing starts in 2015, 1.3 million in 2016, and 1.5 million in 2017.
A strong dollar continues to be a challenge; Meckstroth expects trade will be a net drag on the U.S. economy over the next few years. Inflation-adjusted exports are anticipated to increase only 1.5% in 2015, 4.5% in 2016, and 4.3% in 2017. Meanwhile, imports are expected to grow 5.5% in 2015, 8.1% in 2016, and 6.0% in 2017. The MAPI Foundation forecasts overall unemployment to average 5.4% in 2015, 5.0% in 2016, and 4.9% in 2017.
The manufacturing sector added 210,000 jobs in 2014. The outlook is for an increase of 180,000 jobs in 2015, a drop from 282,000 anticipated in the February report. Meckstroth envisions only 33,000 manufacturing jobs to be added in 2016, a significant decrease from 162,000 in the previous forecast. He anticipates modest growth of 30,000 jobs in 2017.
The refiners’ acquisition cost per barrel of imported crude oil is expected to average $53.80 in 2015, $61.70 in 2016, and $67.50 in 2017.