U.S. manufacturing growth to be ‘sluggish’ in 2017

A report from Arlington, Va.-based Manufacturers Alliance for Productivity and Innovation (MAPI) is forecasting modest to moderate U.S. economic output and “relatively sluggish manufacturing output growth” in 2017.

Economic and political turmoil is lessening in several key and emerging markets like Brazil and Russia, but slowing growth in much of Europe and China is still a concern for the global economy.

“We expect annual U.S. GDP growth to average 2.3% between 2017 and 2020. U.S. manufacturing output growth is expected to average only 1.5% over this period. However, we see multiple risks to both outlooks, including moderately higher interest rates, a high dollar, Brexit’s reverberations, and concerns over geopolitical tensions in the trade arena,” noted the report authors.

Weak capital spending is a factor in the sluggish productivity estimate for the economy, and that will have a negative impact on future growth, wages, and living standards. Growth is likely to remain moderate, extending the post-2005 period in which annual U.S. economic growth has not reached or exceeded 3%, according to the report.

“The realities of an aging population and the uncertain path of recovery from very weak productivity performance are significantly affecting potential growth, the rate at which an economy can grow in a stable, non-inflationary manner. Nonetheless, this is an improvement from our December 2016 forecast.”

Following are some other items in the MAPI report.
• The prediction for the growth of equipment investment remains disconcertingly slow, although the forecasted 4.4% average growth in business equipment spending over the 2017-2020 forecast period is an improvement from the 3.8% that we expected just three months ago.

• Subpar global demand and a high dollar are expected to yield annual export growth of less than 2% until 2020, when export growth is expected to pick up very modestly to 2.7%.

• Manufacturing growth is expected to be a weak 1.2% in 2017, accelerate to 2.6% in 2018, and slow significantly in 2019 and 2020. Average annual manufacturing output growth is expected to be 1.5% between 2017 and 2020, slightly better than the 1% average in the December 2016 forecast.

• A possible firming of global growth and the prospect of new growth-enhancing policies in the U.S. place a positive spin on the forecast, while moderately higher interest rates, a high dollar, and concerns over geopolitical tensions in the trade arena are all concerns for the U.S. growth and manufacturing outlook.