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Stronger than Expected Global Economy, Weaker Than Expected U.S. Economy
MAPI quarterly report sees peak phase of historically strong global expansion continuing, but U.S. exports seen slowing, dollar depreciation likely to continue
Arlington, VA — July 3, 2007 — The broad swath of recent data reveals that the peak phase of an historically strong global expansion will continue for a longer period than most forecasts anticipated, according to a new quarterly report from the Manufacturers Alliance/MAPI.
In MAPI's "Quarterly Forecast of U.S. Exports, Global Growth, and the Dollar: Third Quarter 2007 through Fourth Quarter 2008," economist Cliff Waldman observes that signs of moderation in Chinese growth have, for the most part, reversed, and key Eurozone countries, especially Germany, are growing faster than expected.
In addition, Waldman writes that there is finally some momentum in Japanese consumer spending; emerging Asian nations appear to be recovering from an investment slowdown; and manufacturing growth in India has been north of 11 percent for three consecutive quarters.
U.S. Exceptionalism
It is the NAFTA region that seems to be the exception to this virtuous cycle of global strength, much of it due to weakness in the United States, according to the report. While there have been recent signs of improvement in the U.S economy, the housing situation remains a significant risk. "Until the residential investment downturn runs its course," Waldman writes, "short-term forecasts of U.S. economic growth will have larger than usual margins of error."
The report projects a slowdown in the annual growth of total U.S. goods and services exports, from 8.9 percent during 2006 to 6.4 percent during 2007, due primarily to slower industrialized country growth this year. As the lagged impact of a dollar depreciation takes hold and as both industrialized and developing country growth strengthen, total U.S. export growth is forecast to accelerate to 9.4 percent during 2008.
Growth in non-U.S. industrialized countries — which include Canada, the Eurozone (plus Denmark, the United Kingdom and Sweden) and Japan — is predicted to be 2.2 percent during the first three quarters of 2007. As the U.S. economy improves, MAPI expects growth to increase to 2.4 percent during the fourth quarter of 2007 and the first quarter of 2008, 2.6 percent during the second quarter of 2008, and 3.0 percent during the second half of 2008.
The developing country forecast stems from the expectation that the Chinese, Indian and Mexican economies will face an imminent slowdown period. Growth in the developing countries — which include China, India, Latin America, Mexico and the Pacific Rim (excluding Japan) — is projected to moderate from 5.2 percent during the second quarter of 2007 to 5 percent during the second half. Growth will further decelerate to 4.8 percent during the first half of 2008 before rebounding to 5.1 percent during the last six months, according to the MAPI report.
In MAPI's "Quarterly Forecast of U.S. Exports, Global Growth, and the Dollar: Third Quarter 2007 through Fourth Quarter 2008," economist Cliff Waldman observes that signs of moderation in Chinese growth have, for the most part, reversed, and key Eurozone countries, especially Germany, are growing faster than expected.
In addition, Waldman writes that there is finally some momentum in Japanese consumer spending; emerging Asian nations appear to be recovering from an investment slowdown; and manufacturing growth in India has been north of 11 percent for three consecutive quarters.
U.S. Exceptionalism
It is the NAFTA region that seems to be the exception to this virtuous cycle of global strength, much of it due to weakness in the United States, according to the report. While there have been recent signs of improvement in the U.S economy, the housing situation remains a significant risk. "Until the residential investment downturn runs its course," Waldman writes, "short-term forecasts of U.S. economic growth will have larger than usual margins of error."
The report projects a slowdown in the annual growth of total U.S. goods and services exports, from 8.9 percent during 2006 to 6.4 percent during 2007, due primarily to slower industrialized country growth this year. As the lagged impact of a dollar depreciation takes hold and as both industrialized and developing country growth strengthen, total U.S. export growth is forecast to accelerate to 9.4 percent during 2008.
Growth in non-U.S. industrialized countries — which include Canada, the Eurozone (plus Denmark, the United Kingdom and Sweden) and Japan — is predicted to be 2.2 percent during the first three quarters of 2007. As the U.S. economy improves, MAPI expects growth to increase to 2.4 percent during the fourth quarter of 2007 and the first quarter of 2008, 2.6 percent during the second quarter of 2008, and 3.0 percent during the second half of 2008.
The developing country forecast stems from the expectation that the Chinese, Indian and Mexican economies will face an imminent slowdown period. Growth in the developing countries — which include China, India, Latin America, Mexico and the Pacific Rim (excluding Japan) — is projected to moderate from 5.2 percent during the second quarter of 2007 to 5 percent during the second half. Growth will further decelerate to 4.8 percent during the first half of 2008 before rebounding to 5.1 percent during the last six months, according to the MAPI report.
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