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North American economic forecast growth at slower rate

HE said GDP will grow 3.3% in 2006 and 2.6% in 2007. He forecast the following segments to grow in 2007, but at a slower rate than in 2006: consumer spending 2.4%, down from 3%; capital spending 6.9%, down from 7.8%; industrial production 3%, down from 5%; and housing starts 1.67 million, down from 1.84 million. He forecasts government spending to grow 2.2%, up from 1.9 in 2006.

“The economy started strong in 2006, running into housing headwinds,” he said. “The fear is both of the inflation threat and the possible overreaction by the Federal Reserve, European Central Bank, and others. Volatility is up, commodity prices in retreat. The indicators are mixed, rather than uniformly strong. As central banks raise rates, the likelihood of a slowdown persisting into 2007 increases.”

Meil also spoke about U.S. retail sales of Class 8 trucks/tractors, predicting sales of 360,000 units for 2006 and 205,000 units for 2007. However, he noted that there is still plenty of time for the ongoing pre-buy to affect the current trend.

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