CHICAGO -- Most U.S. manufacturers expect economic growth to slow to 2 percent or less in the first half of 2003 with war worries the biggest obstacle to an economic rebound, according to a national survey of 300 companies released on Monday.
The survey from the National Association of Manufacturers showed that 69.9 percent of respondents believed that growth in the U.S. gross domestic product would be zero to 2 percent in the first and second quarters of this year. Another 11.3 percent said the economy would contract.
These estimates compare with the lackluster growth of 2.4 percent in 2002.
"This has been the slowest manufacturing recovery in recent times," NAM President Jerry Jasinowski told reporters at the National Manufacturing Week trade show. "This has been the most uncertain time in economic history. And as a result, many people have postponed investment."
The survey also showed that 62.9 percent of respondents expected capital expenditures to grow by 5 percent or less this year.
NAM linked the grim outlook to concerns about a possible U.S.-led war with Iraq and general economic uncertainty. These factors, as well as the rising costs of doing business, have put a stranglehold on U.S. manufacturing, which NAM said accounts for about 20 percent of U.S. GDP.
The NAM survey showed that while uncertainty over the war outlook is a major stumbling block for the U.S. economy, 68.2 percent of respondents expect the U.S. economy to rebound quickly once hostilities subside.
The survey's release came on the heels of monthly manufacturing data from the Institute for Supply Management, also released on Monday. The ISM's February manufacturing index dipped below the prior month's levels and came in softer than expected.
Also on Monday, major U.S. automakers led by General Motors reported lower auto sales in February, prompting GM to slash its second quarter production forecast.
Manufacturing has shown signs of improvement since it helped drag the economy into a recession in 2001. But the sector is still not running at full potential, analysts have said.
"An economic recovery is dependent on reestablishing manufacturing," said NAM board member Doug Pertz. "The NAM survey clearly outlined the clear key threat to this type of recovery from the NAM perspective as being rising costs, primarily rising health care and other employee fringe-related costs."
The survey showed 89.1 percent of respondents believe the rising costs of health care and energy have hobbled the manufacturing sector and remain a threat going forward. Other top threats include the emergence of China as a major manufacturing exporter, excessive litigation costs, and the overvaluation of the U.S. dollar.
"I think the exchange rates are beginning to improve," Jasinowski said. The dollar has shed 17 percent of its value over the last year on a trade-weighted basis against a basket of currencies.
The survey also revealed that 48.7 percent of respondents predict their company payrolls will stay the same in the first half of 2003. That compares with the 23.2 percent who expect their payrolls to decline, and the 27.8 percent forecasting payroll increases.
A Labor Department report showed that U.S. nonfarm payrolls in January increased by 143,000 jobs.