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MAPI: Investment Spending Will Drive Growth

Date: Jun 10, 2014 @ 07:06 AM
Filed Under: Economic Commentary

Manufacturing production continues to outpace overall economic growth and will be led more by investment than by consumer-driven advances over the next 18 months, according to a new report.

The Manufacturers Alliance for Productivity and Innovation (MAPI) Quarterly Economic Forecast predicts that inflation-adjusted gross domestic product will expand 2.5% in 2014 and 3.2% in 2015. The former is a decrease from 2.8% and the latter equal to the 3.2% from MAPI’s March 2014 report.

Manufacturing production is expected to fare better, with anticipated growth of 3.2% in 2014 and 4.0% in 2015, consistent with the previous report.

“While consumer-driven manufacturing will grow at a consistently moderate rate, the industries driven by investment will grow at a higher rate,” predicted MAPI Chief Economist Daniel J. Meckstroth, Ph.D. “Energy infrastructure and manufacturing machinery will see increases as firms replace and expand equipment. Aerospace will also experience a big ramp-up in production. In addition, there will be growth in the construction supply chain—HVAC, wood, paint, appliances, and furniture—as we anticipate both residential and nonresidential increases. The acceleration driver will be investment.”

Production in non-high-tech manufacturing industries is expected to increase 2.9% in 2014 and 3.7% in 2015. High-tech manufacturing production, which accounts for approximately 5% of all manufacturing, is anticipated to grow 6.6% in 2014 and 10.0% in 2015.

The forecast for inflation-adjusted investment in equipment is for growth of 5.2% in 2014 and 10.3% in 2015. Capital equipment spending in high-tech sectors will also rise. Inflation-adjusted expenditures for information processing equipment are anticipated to increase 2.7% in 2014 and a strong 14.6% in 2015.

MAPI expects industrial equipment expenditures to advance 8.1% in 2014 and 10.8% in 2015. The outlook for spending on transportation equipment is for growth of 5.6% in 2014 and 3.9% in 2015. Spending on nonresidential structures is anticipated to improve by 4.2% in 2014 and by 5.1% in 2015. Residential fixed investment is forecast to increase by 4.1% this year and a robust 19.9% in 2015.

To read the full MAPI Quarterly Economic Forecast, click here.

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