Economic growth forecast for US

28 April 2010

28 April 2010 | Rebecca Ellinor in San Diego

US purchasing and supply managers expect the country’s economy to grow throughout the remainder of 2010.

This positive outlook was presented by Norbert Ore and Anthony Nieves, the respective heads of the Institute for Supply Management’s (ISM) manufacturing and non-manufacturing business survey committees, who yesterday announced the semi-annual economic forecast at the ISM 2010 conference in California.

Manufacturing is expected to grow “significantly in 2010”, said Ore, while the non-manufacturing sector expects “slight growth”. Nieves said since the services sector became affected by the recession later than manufacturing, it fits that it should also be slower to recover.

Ore announced that the operating rate for manufacturing is now 72.8 per cent of normal capacity, while Nieves said the rate for non-manufacturing is 83.6 per cent of normal capacity.

In summary, Ore said production capacity is expected to increase 6.4 per cent in 2010; capital expenditure is expected to go up by 2 per cent and prices are anticipated to rise a total of 3.8 per cent for all of 2010, which means a raise of 1.1 per cent for the rest of the year. It is estimated that manufacturing employment will increase by 5.2 per cent during the remainder of 2010, and manufacturing revenues will increase 6.3 per cent this year.

Of the non-manufacturing sector, Nieves said production capacity is expected to increase 2.3 per cent this year; capital expenditure is anticipated to rise 1.9 per cent. Prices are expected to go up by 1.7 per cent for all of 2010, which means a 1 per cent increase for the rest of the year. Employment is expected to decrease a tad, 0.1 per cent during the balance of 2010, and non-manufacturing revenues are expected to rise 0.3 per cent in 2010.

Economist Jason Cummins, partner and head of economic research at Brevan Howard Asset Management, however, had less favourable news. Following the presentations by Ore and Nieves, he said the recovery would be weak compared with earlier recoveries. He added that any recovery would be accompanied by greater volatility and he anticipated that the US government – which has spent huge sums propping up the country’s economy – will eventually have to raise taxes to recover some of the deficit.

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