US manufacturing to see sharply slower growth

16 August 2007 18:28  [Source: ICIS news]

WASHINGTON (ICIS news)--TheUS manufacturing industry will see sharply slower growth this year, including several sectors that are key consumers of chemicals and resins, a leading trade group predicted on Thursday.

 

The Manufacturers Alliance said in its quarterly economic outlook that the continuing decline in the US housing sector “is worse than we thought,” shows little sign of easing and is chilling financial markets that are important in sustaining other segments of the economy.

 

“In the face of continuing weakness in the housing sector, growth in the US economy is expected to be slower than previously anticipated,” the alliance said.

 

The US Department of Commerce reported earlier on Thurday that US housing starts fell again in July, down 6% from June and fully 21% off from July 2006.

 

The alliance, whose 450 member companies are US-based manufacturers doing business worldwide, said it expects US gross domestic product (GDP) growth will slow to an inflation-adjusted rate of 1.9% this year.

 

That GDP forecast is below the 2.3% growth for 2007 that the alliance had forecast in its May outlook, and a 1.9% growth rate is well below the 2.5-3% trend growth rate that is seen as necessary for healthy economic development, according to economists at New York University.

 

The alliance said it expects GDP growth to return to 2.5% next year, but the trade group had earlier forecast 3% growth for the new year.

 

In particular, the alliance said it expects US manufacturing growth will fall to 2% this year, compared with a robust 4.7% growth rate seen in 2006.

 

The continuing decline in the US housing sector is worrisome to chemicals and resin producers because that segment is a major downstream consumer of chemicals and chemical-based products.

 

The alliance said the housing downturn also is infecting other economic sectors crucial to the chemicals industry, with growth in industrial equipment expenditures forecast to fall to a meagre 1.6% this year - to be followed by a 1.7% decline in 2008.

 

The transportation sector looks even worse, the alliance indicated, with that manufacturing segment forecast for a 10.6% decline this year.

 

On the plus side, the alliance said computer and electronics production - another chemicals consuming sector - should see a nearly 11% growth this year.

 

US export growth also should continue strong - driven in part by the weak dollar - with a growth rate of nearly 7% this year against a far more modest growth in imports at 2.3%.

By: Joe Kamalick
+1 713 525 2653

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