According to the Manufacturers Alliance for Productivity and Innovation (MAPI) the growth rate of the overall economy was relatively weak in the first quarter of 2012 and was even less robust in the second quarter. Inflation-adjusted GDP increased at only a 2.0 percent annual rate in the first quarter and 1.7 percent in the second quarter of 2012. Daniel Meckstroth, Ph.D., Vice President and Chief Economist stated, “We predict that GDP growth will increase at less than a 1 percent annual rate in the third quarter and less than 2 percent annual rate in the fourth quarter of 2012 and first quarter of 2013. The outlook is for modest growth throughout 2013. Although the pace should pick up in the second half of 2013 and first half of 2014, it will not be until the second half of 2014 that the economy grows at what could be called a moderate pace. Consumers continue to deleverage from debt and therefore can only increase spending commensurate with after-tax income adjusted for inflation.”
The MAPI report continued on to say that the pace of employment growth has been enough to absorb new entrants to the labor force but not enough to reduce the unemployment rate. Less unemployment insurance income and increases in state and local taxes have eaten away at personal income gains. As a result, consumer spending can rise only at a sluggish pace. There is growth in private construction activity and business equipment spending but this is being offset by government spending austerity. Our base case forecast is that inflation-adjusted GDP will rise 2 percent in 2012, 1.7 percent in 2013, and 2.7 percent in 2014.
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