Washington, DC, December 27, 2006--“After slowing to a ‘below-potential’ pace in recent quarters, the economy will continue decelerating toward a ‘soft landing’ in the coming year,” said David Huether, chief economist for the National Association of Manufacturers, upon the release of the NAM’s 2007 Economic Outlook.
“Residential housing continues to be a drag on the economy, though outside of this sector the economy has shown solid growth.
“Continuing improvement in trade, with exports on the rise, and growth in business investment will allow industrial output to grow in concert with the overall economy,” he said. Huether projected that the manufacturing sector will grow by 2.8 percent in the coming year, slightly lower than the 2.9 percent overall growth in the Gross Domestic Product, and then 2.7 percent in 2008.
“A downturn in housing will continue to drag the economy throughout the first half of 2007,” Huether said. “This translates into continued negative effects on specific manufacturing sectors; wood and textile products and nonmetallic minerals.
“Fueled by soaring profits and corporate cash flow, business investment spending has increased by 8.3 percent over the past four quarters,” Huether said. “This is the fastest fourth quarter pace of the current expansion. However, this spending will begin to decelerate, growing at a more restrained 6.4 percent in the coming year, and 4.1 percent in 2008.
“International trade also continues to buoy the economy as exports are on pace to outpace imports for three out of the past four years,” Huether said. “The combination of a more-competitive dollar and strong growth abroad will help the trade deficit decline from a high of 5.9 percent of GDP in 2006 to 5.4 percent by 2008.
“This balance of improved trade and continued business investment, offset by a slumping housing sector, leaves us with a slowing economy,” he said. “Thus, the Federal Reserve is expected to ease monetary policy in the coming year by lowering the federal funds rate by 50 basis points by mid-2007.”
