The US economy will improve next year in both the manufacturing and non-manufacturing sectors but few jobs will be created, a report today that bolstered expectations for a "jobless recovery."
In its semiannual report, released as Federal Reserve policymakers meet in Washington, the Institute for Supply Management said it expected factory revenues to grow 5.4 per cent next year, up sharply from a 1.1 per cent increase so far in 2002.
Among their main concerns going forward, factory executives surveyed cited a weak economy, labour and benefits costs and the threat of terrorism and war.
Manufacturing capital spending is expected to rise 4.6 per cent next year, despite the fact capacity utilisation is only running at 79.2 per cent, virtually unchanged from the 79.3 per cent seen six months ago, ISM said.
The vast non-manufacturing, or services, sector of the economy is also expected to strengthen in 2003 even as services business cut back their capital spending by 0.4 per cent, the survey predicted. Both manufacturers and executives from non-manufacturing companies predicted holiday retail sales will "be slightly improved" compared with last year.
Manufacturers predicted the US dollar will remain strong against major currencies of trading partners next year, despite pressure from the industry on the Bush administration about the strength of the currency.
Prices are expected to remain tame next year, with only a 0.5 per cent increase foreseen in prices manufacturers pay to suppliers, picking up to a modest 1.3 per cent for the remainder of the year.