MAPI believes that the fourth quarter decline in economic activity is not the beginning of another recession or a harbinger of one. On the contrary, the end-of-year weakness was a correction in production to temporary surges in the third quarter.
We predict that manufacturing production will increase 2.2 percent in 2013 and 3.6 percent in 2014, versus 1.8 percent and 2.8 percent growth, respectively, for the economy as a whole.
The bottom line is that stronger growth in business fixed investment and residential construction is offset by government spending austerity. Therefore, GDP growth closely matches the modest gains in consumer spending in 2013 when taxes were raised. Our forecast for 2014 is for an acceleration in consumer, business investment, and residential spending, but no change in state and local government spending. A negative trade contribution and federal government austerity will continue to dampen growth in 2014.
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