ISM: Economic Growth Expect To Continue Throughout The Year

Economic growth is expected to continue in the U.S. throughout the remainder of 2017, say the nation's purchasing and supply executives in their Spring 2017 Semiannual Economic Forecast. Expectations for the remainder of 2017 continue to be positive for manufacturing.

Economic growth is expected to continue in the U.S. throughout the remainder of 2017, say the nation's purchasing and supply executives in their Spring 2017 Semiannual Economic Forecast. Expectations for the remainder of 2017 continue to be positive in both the manufacturing and non-manufacturing sectors.

Manufacturing Summary

Sixty-four percent of respondents from the panel of manufacturing supply management executives predict their revenues will be 8.5 percent greater in 2017 compared to 2016, 12 percent expect a 9.6 percent decline, and 24 percent foresee no change in revenue. This yields an overall average forecast of 4.4 percent revenue growth among manufacturers for 2017. This current prediction is 0.2 percentage point below the December 2016 forecast of 4.6 percent revenue growth for 2017, but is 3.5 percentage points above the actual revenue growth reported for all of 2016. With operating capacity at 82.5 percent, an expected capital expenditure increase of 5.2 percent, an increase of 2.5 percent for prices paid for raw materials, and employment expected to increase by 1.3 percent by the end of 2017 compared to the end of 2016, manufacturing is positioned to grow revenues while managing costs through the remainder of the year.

β€œWith 17 of the 18 industries within the manufacturing sector predicting revenue growth in 2017, when compared to 2016, U.S. manufacturing continues to move in a positive direction,” says Bradley J. Holcomb, CPSM, CPSD, chair of the ISM Manufacturing Business Survey Committee.

Operating Rate

Purchasing and supply managers report that their companies are currently operating on average at 82.5 percent of normal capacity, representing a small increase from the 81.9 percent reported in December 2016, as well as slightly larger increase from the 81.7 percent reported in April 2016.

Production Capacity

Production capacity in manufacturing is expected to increase 3.3 percent in 2017. This increase is less than the 4.2 percent increase predicted in December 2016 for 2017, but is greater than the 2.5 percent increase reported in December 2016 for all of 2016. This reflects the continuing strength in the sector as 38 percent of respondents expect an average capacity increase of 10.9 percent, 7 percent expect decreases averaging 13.7 percent, and 55 percent expect no change.

Predicted Capital Expenditures – 2017 vs, 2016

Survey respondents expect a 5.2 percent increase in capital expenditures in 2017. This is notably higher than the 0.2 percent increase predicted by the panel in the December 2016 forecast for 2017. Currently, 30 percent of respondents predict increased capital expenditures in 2017, with an average increase of 32.9 percent, and the 17 percent who said their capital spending would decrease an average of 27 percent. Fifty-three percent say they will spend the same in 2017 as they did in 2016.

Prices β€” Predicted Changes Between End of 2016 and End of 2017

In the December 2016 forecast, respondents predicted an increase of 0.9 percent in prices paid during the first four months of 2017; and they now report prices have increased by 2.2 percent for the same period. The 55 percent who say their prices are higher now than at the end of 2016 report an average increase of 4.9 percent, while the 11 percent who report lower prices report an average decrease of 4.2 percent. The remaining 34 percent indicate no change for the period.

When asked to predict 2017 price changes, 64 percent of respondents expect the prices they pay to increase by 4.8 percent for the full year of 2017 compared to the end of 2016. At the same time, 13 percent anticipate decreases averaging 4.5 percent. Including the 23 percent who expect no change in prices, survey respondents expect net average prices to increase by 2.5 percent for the entire year 2017, indicating that prices are expected to rise 0.3 percentage point over the remainder of the year.

Business Revenues Comparison β€” 2017 vs. 2016

Looking ahead, expectations are for increased revenues in 2017 as purchasing and supply management executives predict an overall net increase of 4.4 percent in business revenues for 2017 over 2016. This is 0.2 percentage point lower than the 4.6 percent increase forecast in December 2016 for all of 2017, and 3.5 percentage points higher than the 0.9 percent increase reported for 2016 over 2015. Sixty-four percent of respondents say that revenues for 2017 will increase an average of 8.5 percent over 2016. Conversely, 12 percent say their revenues will decrease an average of 9.6 percent, and the remaining 24 percent indicate no change.

Employment – Predicted Changes Between End of 2016 and End of 2017

ISM’s Manufacturing Business Survey respondents forecast that manufacturing employment will increase by 1.3 percent by the end 2017 compared to the end of 2016. Thirty-five percent of respondents expect employment to be 6.3 percent higher, while 12 percent of respondents predict employment to be lower by 7.3 percent. The remaining 53 percent of respondents expect their employment levels to be unchanged for the remainder of 2017.

Institute for Supply Management (ISM) serves supply management professionals in more than 90 countries. Its 50,000 members around the world manage about US$1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM leads the profession through the ISM Report On Business, its highly regarded certification programs and the newly launched ISM Mastery Model. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

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