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

This and the next two years the economy is expected to expand at slow rates. Measured by GDP in constant 1987 dollars, rates of growth are predicted to be 2.8% this year, and 2.2% and 2.4% in respective 1996 and 1997 Forecast data indicate that the slow growth will continue afterwards. Data on price point to small increases in price levels during the forecast period. The unemployment outlook remains dismal. For the rest of this year and in next two years the unemployment rate is predicted to be in the range of 5.6-5.8%. Data on interest rates indicate that the next year, interest rates will be heading downward. Some increases are expected in 1997.

REAL GROWTH

Major factors which will positively affect the economy in the next two years are expected to be increases in consumer outlays on nondurable goods and services business capital outlays, spending of state and local governments, and exports. Factors expected to cause the slowdown in the expansion of the economy are decreases in spending of Federal government, lackluster demand for consumer durables, notable for cars and household appliances and furnishings, flatness in residential construction, and increase in imports.

Data on consumer outlays or nondurables point to a moderate and steady growth of spending on food, beverages, gasoline, petroleum and coal products, paper and paper products, household chemicals, pharmaceuticals, sport and recreation goods, hardware, consumer rubber and plastic products, goods sold in convenience stores, fast food stores, and bookstores. Forecast data for footwear, textile mill products, apparel, and leather products point to some slowdown in sales in the next year, and a faster growth in 1997. In the consumer services segment, significant increases in growth rates are predicted for consumer outlays on health and health related services, recreation, transportation, personal services, educational services, and maintenance and repair services. Data on spending on consumer durables in the next two years are mixed. The 1996 forecast data of consumer spending on cars and most categories of household appliances and furnishings show flatness and temporary declines. In the next year, car sales are expected to be weak. Spending on residential construction, notably on single-family housing is also expected to be flat for the most of the year. Data on consumer spending on cars and household related durables in 1997 are optimistic. Compared to 1996, sales of both categories of durables are expected to resume the upward trend. Forecast data of the other categories of consumer durables, notably light-duty trucks, household electronics, and materials for home improvement and main-tenance are positive for both forecast years.

Measured in constant 1987 dollars, in 1996 businesses are expected to increase their outlays on nonresidential construction by 4.7%, and in 1997 by 3.3%. Forecast data of business capital outlays on machinery and equipment are also positive, though not as good as the data for nonresidential construction. In the next two years, capital outlays of businesses on machinery and equipment are expected to taper off. Compared to this year's 4.8%, outlays on machinery and equipment will increase by 3.4% next year, and by 3.0% in 1997.

Data on spending of state and local governments are positive. Outlays of state and local governments on public projects, educational services, and other goods and services will increase moderately in both forecast years.

The exports outlook is also good. This and the next two years exports will continue increasing. Strong rates of growth of exports are predicted for agricultural products, machine tools, office machines, instruments, aircraft and parts, and international communications services.

EMPLOYMENT

Data indicate that this and the next two years' employment outlook will remain weak. Measured by the unemployment rate, data point to rates of 5.6%, 5. …

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