Slower industrial growth is expected
Trade group says Fed will cut rates
WASHINGTON -- A trade group representing American manufacturers yesterday predicted a soft landing for the US economy in 2007, despite expectations that residential real estate will act as a drag on growth.
In its annual forecast, the National Association of Manufacturers forecast industrial output would decelerate to a growth rate of 2.8 percent, slightly below the 2.9 percent rate of expansion it expects for the overall economy.
The manufacturing sector grew by 4.5 percent, on average, in 2006, while the US economy expanded by 3.1 percent, according to the association.
In looking back over the past year, the association said the country's manufacturing expansion was "likely a cyclical peak in the pace of growth."
The association's chief economist, David Heuther said manufacturers in general would benefit from rising exports and increased business investment, though he cautioned that producers of wood and textile products, among others, would suffer from the slowdown in the housing sector.
"After slowing to a below-potential pace in recent quarters, the economy will continue decelerating toward a soft landing in the coming year," Heuther said.
Heuther predicted the nation's slower economic growth would prompt the Federal Reserve to lower interest rates half a percentage point by the middle of next year.
Declining housing prices, rising interest rates and high energy prices will dampen consumer spending, hurting motor vehicle manufacturers particularly hard, the report said.
Oil prices rose toward $63 a barrel yesterday after Iran warned it could use its oil exports as a weapon following the UN Security Council's decision to impose sanctions on its trade in nuclear goods and as unusually warm weather in the United States helped curbed demand for heating fuel.
US crude gained 19 cents to $62.60 a barrel. while Brent crude rose 37 cents to $62.79.
Material from Reuters was used in this report. 
