Economic expansion will continue with GDP up 2.3% in 1998
Businesses plan to expand in 1998, although at slightly more modest levels than those of 1997.
By Daryl Delano -- Modern Materials Handling, 1/1/1998
Overall economic growth in the U.S. continued at a remarkably strong pace during the third quarter of last year, with inflation-adjusted gross domestic product (GDP) rising at a 3.5% annualized rate. Business investment growth rates were even stronger. Capital spending for new or modernized nonresidential buildings grew at a 10.1% rate during the July-September period, following a 4.7% decline during the spring. More impressively, business investment in new equipment recorded an annualized growth rate of an extraordinary 22.1% during the third quarter of last year, nearly as strong as the breathtaking 23% second-quarter gain.Materials handling equipment manufacturers and distributors certainly benefited from the positive economic conditions during 1997. Furthermore, the presently favorable economic conditions in the United States will continue during 1998. The country is in the midst of the third-longest period of economic expansion in the past 50 years. Preliminary indications are that GDP grew by 3.7% during 1997, with no appreciable run-up in either wage or price inflation.
In general, most mid-sized manufacturers anticipate higher year-end profits, and remain optimistic about 1998, with projections that their 1997 sales increased an average of 11% over 1996, according to the national accounting and management consulting firm of Grant Thornton LLP. Among the firm's recent findings, based on a survey of top executives from 200 manufacturing companies with sales between $20 and $500 million, more than 60% predict that profits will increase above 1996 levels, while 27% say that earnings should remain about the same as the results in 1996.
We are forecasting a slowdown in economic growth in 1998. GDP will rise by an inflation-adjusted 2.3% during the year from its lofty 1997 level, as measured on an annual average basis. Three major trends will have some moderating influence on the U.S. economy's growth potential: a pronounced slowdown in the growth of business investment spending; high levels of consumer debt, particularly installment debt; and an increase in inflation brought about by heightened average wage demands resulting from historically low levels of unemployment.
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