Major Indicators Show Modest Growth for 2010

The Global Economic Outlook from the Conference Board, the latest Manufacturing Institute for Supply Management (ISM) Report on Business and a new report by the Manufacturers Alliance all suggest long-awaited economic growth is on the way—both domestically and internationally.

According to the Conference Board’s Global Economic Outlook, world gross domestic product will grow 3.5% next year and more than 4% in 2011. The report targets developing economies as drivers of much of that growth, estimating that GDP in developed countries will grow an average of 1.5% from 2011 to 2016, while GDP in developing countries is likely to grow 5.8%.

“Global growth will resume in 2010, with global output per head returning to pre-crisis levels,” says Bart van Ark, chief economist at the Conference Board. “Looking further out, emerging and developing economies will account for a much larger share of the global pie—as much as two thirds by 2016. And, while China will surely be a major force in the unwinding of the crisis, we’ll see other emerging markets increasingly fueling global growth.”

According to the November ISM report, economic activity in U.S. manufacturing expanded in November for the fourth consecutive month, and the overall economy grew for the seventh consecutive month. The Purchasing Managers’ Index (PMI) registered 53.6, which is above the growth threshold but lower than October’s PMI of 55.7. Recovery is continuing but at a slower rate, according to ISM.

"The manufacturing sector grew for the fourth consecutive month in November. While the rate of growth slowed when compared to October, the signs are still encouraging for continuing growth as both new orders and production are still at very positive levels, and the prices index fell 10 points, signaling less inflationary pressure on manufacturers' costs. Overall, the recovery in manufacturing is continuing, but many are still struggling based on their comments," says Norbert J. Ore, CPSM, CPM, chair of the ISM manufacturing business survey committee.

The new orders index registered 60.3 in November, 1.8 points higher than the 58.5 registered in October. November is the fifth consecutive month of growth in the new orders index.

And, finally, the Manufacturers Alliance report predicts growth will return to the U.S. economy but at a modest pace. Inflation-adjusted GDP will decline 2.5% in 2009, grow 2.4% in 2010 and grow another 3.5% in 2011.

“We are pleased there is growth in the overall economy and surprisingly strong growth in manufacturing,” says Daniel J. Meckstroth, Manufacturers Alliance/MAPI chief economist. “Yet, by historical standards, it is still modest compared to recoveries from past recessions. Manufacturing production growth, at 4.6%, will grow faster than the general economy, at 2.4%, in 2010. An inventory swing in the goods-producing sector is a major reason for the acceleration in manufacturing production. We expect manufacturing growth to be led by high-technology products, semiconductors and computers.”

Manufacturing production growth is expected to decline 11.3% this year before rebounding to 4.6% growth in 2010 and 6.0% growth in 2011. The report also shows recovery in industrial equipment expenditures. MAPI predicts 3.5% growth in 2010 and a significantly improved 22.6% growth in 2011.

However, MAPI forecasts unemployment to average 9.2% in 2009, 10% in 2010, and 9.1% in 2011.

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