The US economic slump is expected to continue well into next year as the impact of consumers spending their government rebate checks dwindles, a manufacturing survey showed.
Inflation-adjusted GDP growth will slow to 1.6 per cent in 2008 and decelerate to 1.3 per cent in 2009, according to the Manufacturers Alliance/MAPI Quarterly Economic Forecast. The 2009 GDP forecast is down from 1.9 per cent growth projected in the May report.
“The Internal Revenue Service accelerated the payment of tax rebates this year under the economic stimulus plan, getting cash in consumers’ hands earlier than expected,” said chief economist Daniel Meckstroth.
“The cash windfall is only temporary, and we expect a corresponding decline in spending in fourth quarter 2008 and into early 2009,” Meckstroth said.
Exports and imports will likely continue to buttress the soft economic environment, the group said. Export growth should continue to outpace that of imports by a wide margin.
Inflation-adjusted exports should rise 8.4 per cent in 2008 and 7.3 per cent in 2009, while imports are expected to decline by 1.4 per cent this year and to increase by only 0.4 per cent next year, MAPI said in its quarterly survey.
“Consumers are reducing discretionary purchases; these items tend to be imported,” Meckstroth said. “At the same time, a weak dollar has improved the competitive position of US exports of goods and services in the world marketplace.”
“A declining dollar is beneficial and has made a major contribution in keeping the economy growing amid severe economic shocks,” Meckstroth said.
The group said manufacturing production growth will decline 0.5 per cent in 2008 following 1.7 per cent growth in 2007 but foresee a rebound in 2009 at 1.6 per cent.
The previous quarterly MAPI report had forecast production to grow by 0.4 per cent in 2008 and by 3.1 per cent next year.
Earlier in August, the Labour Department said the US unemployment rate hit its highest in four years during July as employers cut jobs for a seventh straight month. The jobless rate climbed to 5.7 per cent from 5.5 per cent in June.
MAPI forecast the unemployment rate at an average 5.4 per cent in 2008 and 6.0 per cent in 2009.