The near-term outlook is for slow growth and then gradual acceleration. I believe it was a combination of tighter monetary policy, higher energy prices, and lower equity values that prompted a substantial slowdown in growth. The impacts of these developments have not completely worked their way through the economy yet, but if energy prices and equity values stay relatively constant going forward, then I believe the economy will experience positive growth this year. The first half ought to be the period of more pronounced slowdown, with an improvement beginning in the second half. Clearly there will be areas of weakness.
Manufacturing is likely to feel the slowdown in growth the most.
Growth in consumer spending began to slow in 2000, and purchases of big-ticket items are likely to be soft. Growth in businesses' spending for new equipment also will slow as the imperative to expand capacity diminishes. Weak sales have already led to production cutbacks in autos and elsewhere in the manufacturing sector. Order books will continue to thin as businesses all along the production and distribution chain take care to keep inventories lean and work off any overhangs. Several factors should keep overall spending from slowing down too much, however.