Global Economy, Economic Environment, Money & Finance, GDP
Kris Bledowski, director of economic studies, says the European economic recovery is proceeding slowly and the sources of growth are more balanced than in the past. Despite low interest rates, capital formation has stalled.
A number of factors have challenged economic growth in 2015, among them a second straight severe winter, the West Coast port strike, a strong dollar, and collapse of oil prices, but assuming the first two were anomalies, there should be marginal improvement for 2016, according to a new forecast.
The overall outlook for the U.S. economy, with particular emphasis on the manufacturing sector, for the remainder of 2015 and 2016 highlighting manufacturing’s growth and challenges for a five-year horizon.
Manufacturing production grew 1.8% in 2015. We predict manufacturing production will increase 2.6% in 2016, 3.0% in 2017, and 2.8% in 2018. At that point, any output gap from the 2008-2009 recession will have closed and manufacturing growth will slow down to potential. The forecast is for growth of 2.6% in 2019 and 2.0% in 2020.
Global Economy, Economic Environment, Regional Economic Integration, Money & Finance, GDP
Domestic demand has emerged as the decisive driver of economic activity in Europe. Business investment is near a takeoff that will bolster industrial production and consumer income beyond 2016. Factors that could derail this sunny outlook include the re-emergence of the Greek default and possible policy disagreements within the EU on Russia, the Middle East, or refugees.
We are lowering the forecast for this year because of the persistence of the shocks to manufacturing demand, lack of progress in cutting excessive inventories, and the downward revision by the Federal Reserve of reported growth over the previous three years. Manufacturing production increased 0.8% last year and we forecast only 0.4% growth in 2016. We do, however, expect 2.5% growth in 2017 and a 2.8% increase in 2018.
While the third quarter is off to a good start, declining production in the first half means that manufacturing production will grow only 0.2% this year as a whole. Communications equipment, medical equipment and supplies, and private nonresidential construction have led growth this year. The manufacturing sector’s production should speed up to a modest pace of growth in 2017 (1.6%) and 2018 (2.5%). Consumer-driven manufacturing markets will continue to support the sector but it is a modest rebound in investment- and material-driven manufacturing that will allow an acceleration. A key driver, mining and drilling exploration, is finally bottoming out and should return to growth in 2018.
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