The release of the National Association of Manufacturers’ 2008 Economic Forecast today points to “a recession being averted but a significant deceleration in GDP growth through the first half of this year due to surging energy prices and a slowdown in corporate profits that will hold down business spending.”
David Huether, the NAM’s chief economist and the report’s author, sees GDP growing by just 1.4 percent in the first half of this year after slowing from 4.9 percent in the third quarter of 2007 to just 2 percent in the fourth quarter.
“The ripple effect of the housing downturn and a slowdown in motor vehicle production has caused a significant hit to the overall manufacturing economy,” Huether said. “While these sectors shed 125,000 jobs and saw output decline by 2.4 percent last year, the remaining sectors picked up 18,000 jobs and output rose by 2.7 percent.”
Overall manufacturing output edged up by just 1.8 percent in 2007 - its slowest pace in four years - and is expected to continue at 1.9 percent in 2008, according to the report. Manufacturing employment is currently forecast to drop by 90,000 in the coming year.
“The best way create jobs is to jump start business investment with an enhanced capital-cost recovery system,” said Dorothy Coleman, the NAM’s vice president for tax and domestic economic policy. “The NAM is advocating a package of tax relief proposals geared toward economic growth. As we saw in 2003, a pro-business investment growth package can make a real difference.”
The NAM’s tax relief proposals include a 50 percent bonus depreciation provision for business investment. According to the report, this would nearly double the growth of business investment this year resulting in a half percentage point added to GDP growth, faster manufacturing output and an additional 112,000 manufacturing workers by the end of this year (Table 2 in the report).