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Prospects for global manufacturing growth

The latest quarterly global report from the Manufacturers Alliance/MAPI, shows that the world economy appears to have reached a cyclical peak. Cliff Waldman, economist and the report''s author, foresaw a transition to a period of softer but sustainable global activity, but he concluded that increasingly tight global monetary policy is a key risk for the world outlook.

In the industrialized countries, MAPI anticipates that the cumulative economic growth rate outside the U.S., including Canada, the Euro zone, and Japan, would slow from 2.4% in Q4 2005 to 2.3% during the first three quarters of 2006. It would then rebound to 2.4% in Q4 2006, and 2.5% for the first half of 2007.

In developing countries, which include China, India, Mexico, and the rest of Latin America, and the Pacific Rim countries, excluding Japan, the growth rate is expected to soften from 4.3% in Q4 2005 to 3.9% in Q1 2006. Growth is expected to accelerate to 4.2% in Q2 2006 and 4.5% in Q3 2006 as the Mexican economy comes out of its recent slump and continues to strengthen. A modest slowing in China is likely to take developing country growth to 4% in Q4 2006 and 4.2% in the first half of 2007. Growth is then projected to rebound to 4.5% in the second half of 2007 as the Chinese economy recovers.

Total U.S. export growth is expected to slow from 7% in 2005 to 5.9% in 2006, primarily due to the laggard effect of dollar appreciation in 2005. The Manufacturers Alliance subsequently expects that the growth in export demand will return to 7% in 2007. "While key-country data and activity in world markets point to imminent moderation in global growth, the demand for U.S. exports should stay at levels that are supportive of continued U.S. economic expansion as well as expansion in U.S. manufacturing output," Waldman concluded.-Clare Goldsberry; [email protected]

TAGS: Business
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