Updating its U.S. economic forecast, the Institute for Supply Management (ISM) reports optimism among U.S. manufacturers has improved since December.
Economic growth is expected to continue in the United States throughout the remainder of 2013, the nation's purchasing and supply executives reported, and expectations for the remainder of 2013 continue to be positive in both the manufacturing and non-manufacturing sectors.
The ISM released its 2013 forecast in December and has refreshed the data through April.
Sixty-six percent of respondents from the panel of manufacturing supply management executives predict their revenues will be 9.9 percent greater in 2013 compared to 2012, 12 percent expect a 14.6 percent decline, and 22 percent foresee no change, according to Bradley J. Holcomb, CPSM, CPSD, chair of the ISM Manufacturing Business Survey Committee.
Taken in aggregate, the data yields an overall average expectation of 4.8 percent revenue growth among manufacturers in 2013, which is an increase of 0.2 percentage point from December 2012 when the panel predicted a 4.6 percent increase in 2013 revenues.
“This is very broad-based growth,” Holcomb said; “Seventeen of the 18 sectors we cover have forecast growth for their industry. The one slight decline is transportation equipment, which includes aircraft, which might be impacted by cuts in defense spending.”
With operating capacity at 80.2 percent, and expected capital expenditure increase of 9.1 percent, prices paid are expected to increase a modest 0.9 percent from now through the end of 2013. However, employment is expected to grow only 0.9 percent for the balance of 2013 as manufacturers position to grow revenue while containing costs through the remainder of the year, according to the ISM.
The capital expenditure increase is particularly heartening. “That’s a pretty generous amount, so we are seeing manufacturers increase production capacity; and we are seeing new technologies come online,” said Holcomb. “This represents reasons for additional optimism.”
The pricing for raw materials has been a very moderate and controlled expansion, he added, which means manufacturers see the opportunity to increase revenue, control costs and open up margin through increased productivity measures.
The relatively flat employment data is in line with expectations.
“There are still unpredictable headwinds such as sequestration,” Holcomb added, “but manufacturing seems to have weathered the storm and is showing its leadership in the world economy. The industries leading the growth include wood, furniture and electrical appliances, which are consistent with good news in the housing market. In addition, the automotive industry and various other sectors – fabricated metal products – are also doing well,” Holcomb concluded
The 17 industries reporting expectations of growth in revenue for 2013 — listed in order — are: Wood Products; Furniture & Related Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Paper Products; Plastics & Rubber Products; Textile Mills; Computer & Electronic Products; Machinery; Primary Metals; Chemical Products; Apparel, Leather & Allied Products; and Fabricated Metal Products.