Supply Chain Managers Confront Mixed Economic Forecast

According to IHS Chief Economist Nariman Behravesh, “the glass is more than half full…or soon will be."
By Patrick Burnson, Executive Editor
June 06, 2013 - SCMR Editorial

According to IHS Chief Economist Nariman Behravesh, “the glass is more than half full…or soon will be.”

First, the bad news.

Because of multiple headwinds, it has been difficult for the US economy to gain momentum and grow at rates that are more typical for the fifth year of a recovery. The government spending sequester (now expected to last at least through the end of the year) will hurt growth through the fourth quarter. A protracted recession in the Eurozone and weaker growth in emerging markets mean that there are no lifelines for the United States from the rest of the world. This is hurting manufacturing and prompting businesses to remain ultra-cautious about hiring and capital spending.

Now the good news.

The underlying growth rate in the economy is stronger than the headline numbers suggest. The January tax hikes and the subsequent spending cuts have reduced GDP growth by approximately 1 percentage point. As the impact of this fiscal tightening dissipates, growth will rebound—likely by late this year or early next year. While the robust (3.4%) first-quarter growth rate of consumer spending is unsustainable, US households will be able to maintain spending growth of 2.0–2.5% this year and next.

Family finances are becoming much more healthy, payroll jobs growth is running at a solid pace of 150,000–200,000 net new jobs each month, credit conditions are easing, and consumer sentiment is at the highest level since July 2007. Thus, the consumer will provide a solid foundation for growth. On top of that, residential investment will probably grow at a 15–20% annual rate and nonresidential fixed investment will increase at a 4–7% rate (mostly driven by business spending on equipment). All this adds up to growth in the 3.0–3.5% range for most of 2014—once the headwinds from fiscal austerity and weak global growth diminish.



About the Author

image
Patrick Burnson
Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).

Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

The saga continues, as the PMA and ILWU plan to resume their contract negotiations on Monday, August 4, in San Francisco

Carload volumes were up 7.6 percent at 299,256, topping the week ending January 12 at 290,607 and the week ending July 5 at 270,731.

U.S. companies made only marginal improvements in their ability to collect from customers and pay suppliers in 2013, while showing no improvement in how well they managed inventory, according to the 16th annual working capital survey from REL a division of the Hackett Group, Inc.

Study suggests solutions for filling the talent gap, including the development of robust ties with the education system.

The Department of Transportation’s Bureau of Transportation Statistics (BTS) reported this week that U.S. trade with its North America Free Trade Agreement (NAFTA) partners Canada and Mexico increased 5.4 percent from May 2013 to May 2014 at $103.9 billion.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. Contact Patrick Burnson

Comments

Post a comment
Commenting is not available in this channel entry.