Academic journal article The Journal of Business Forecasting Methods & Systems

U.S. Economic and Industrial Outlook: Kent Model Forecasts

Academic journal article The Journal of Business Forecasting Methods & Systems

U.S. Economic and Industrial Outlook: Kent Model Forecasts

Article excerpt

The key indicators of this and the next two years point to a significant slowdown in the economy. Measured by GDP in constant 1987 dollars, this year's growth rate is expected to be 2.1%, compared to 4.1% of the last year. In 1997, it will further decline to 1.8%. Data do not point to a recession in the forecast period (1996-1997). Compared to the first half of this year, the unemployment rate in the second half of the year is expected to increase marginally. It will continue increasing in the next year. Declines in the rate are predicted for 1997. Price outlook is optimistic. Consumer and producer prices are expected to increase within tolerable limits. A slowdown in the growth of personal income, personal disposable income, and earnings of businesses is predicted for the next two years. In the rest of this year, interest rates are expected to hover around levels of the end of the first half of this year. Marginal declines in rates and yields are predicted for 1996 and 1997.

REAL GROWTH

In the rest of this year, major factors causing the slowdown in the growth of the economy are expected to be declines in these segments: cars, construction of single-family dwellings, Federal government expenditures on goods and services, and a slowdown in the growth of consumer expenditures. In 1997, business capital outlays, notably outlays on machinery and equipment are expected to decline.

Data of output, shipments, and sales of cars indicate that the automobile cycle will continue winding down. Compared to the last year's sales of 9.1 mil. units, this year' s sales are expected to decline to 8.9 mil. Forecast for 1996 calls for a further decline to 8.8 mil. units. Data for 1997 are more optimistic: 9.0 mil. units sales are predicted for that year. Data for housing starts are mixed. In the single-family segment, continuing declines this and the next year are predicted, and flatness in 1997. Compared to single-family housing, the apartment housing will show more vigor. Markets for multifamily housing are expected to be strong this year. In 1996 and 1997, some declines in the number of starts are predicted. Declines will not be as large when compared to those in single-family housing, however. It is anticipated that the Administration will continue its policy of reducing Federal budget expenditures on goods and services. Compared to the 4.5% decline in the last year, Federal government expenditures on goods and services included in the GDP are expected to further decline by 6.5%, and in 1996 and 1997 by respective 5.8% and 7.2%, measured in constant 1987 dollars. Data on consumer spending show regular and continuing increases in spending on food and kindred products, energy, and household chemicals, and marginal increases on textile, apparel and footwear. During the forecast interval, the fastest growing consumer expenditures are expected to be on services, notably health care services, motor vehicles and household maintenance and repair services, transportation, fast food, hotels, motels and restaurants, travel, personal services, and entertainment. In the durable segment, consumers are expected to continue slowing down their expenditures on cars, home building materials, carpeting, and appliances. On the other hand, data on spending on home electronics and hardware point to a continuing strength. Business capital outlays on machinery and equipment are expected to be strong this and the next year. They will slowdown in 1997.

Factors which will contribute to the growth of the economy are expected to be: exports, business capital outlays on plants, the other private and public nonresidential construction, and spending of State and local governments on goods and services.

Forecast data of exports are optimistic for the rest of this year and next two years. Industries which will benefit from increasing demand for American products are expected to be high technology, engines, aircraft, machinery and equipment, instruments, paper and products, chemicals and products, defense products, and agricultural products. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.