"Net exports will keep the U.S. economy out of recession in 2008," the organization said in its outlook for the U.S. economy and manufacturing.
WASHINGTON (Reuters) - While manufacturers expect the economy to slow significantly in 2008, they still think a recession will be averted, the National Association of Manufacturers said on Wednesday.
"Net exports will keep the U.S. economy out of recession in 2008," the organization said in its outlook for the U.S. economy and manufacturing.
Exports are expected to grow by 7 percent this year, which is more than double the 3 percent rise in imports, NAM said. As a result, trade will contribute to 47 percent of the growth in gross domestic product this year, the group said.
For the year overall, gross domestic product will grow by just 1.1 percent in 2008, the slowest pace since 2001.
!ADVERTISEMENT!Growth will essentially stall in the first half of the year followed by moderate 2.3 percent growth in the second half, NAM said.
NAM forecast GDP to contract at an annual rate of 0.6 percent in the first quarter, with declines in residential investment and consumer growth in exports and business investments. A 0.2 percent gain follows in the second quarter.
"Without the improvements in trade, GDP growth would be negative in both the first and second quarter of 2008," the organization said.
Slower economic growth will lead to a 5.7 percent unemployment rate by the fourth quarter of 2008, NAM said.
"The pace of job growth will decelerate in 2008, with the economy creating under 1 million jobs for the first time since 2003," the organization said.
U.S. employers cut 63,000 jobs in February at the steepest rate in nearly five years and a second straight month of employment losses, Labor Department data showed last week. The unemployment rate was 4.8 percent.
The manufacturing sector will slightly outpace the overall economy and grow by 1.5 percent in 2008 after a 1.7 percent growth in 2007, NAM said.
Industries that are most export oriented such as aerospace, machinery and medical equipment will outperform the rest of manufacturing as well as the economy in general, it said.
The threat of a significant slowdown in economic growth will also prompt the Federal Reserve to cut its bellwether federal funds rate by at least another 50 basis points in the first half of the year.
The Fed has lowered borrowing costs by 2.25 percentage points to 3 percent in five steps since mid-September to try to halt a sharp slowdown in an economy hit by a housing slump and a credit crunch.
The Fed's policy-making Federal Open Market Committee next meets on March 18.
(Reporting by Nancy Waitz, Editing by Chizu Nomiyama)
