TEMPE, Ariz. — Expectations and optimism are high for 2008 in the manufacturing sector, according to an economic forecast by the Institute for Supply Management (ISM).
Sixty-two percent of survey respondents expect greater revenues in 2008 than in 2007.
“Manufacturing purchasing and supply executives are mostly optimistic about their organizations’ prospects for the first half of 2008, and predict additional growth during the second half,” said Norbert Ore, chair of the ISM Manufacturing Business Survey Committee. “While 2007 has been a good year overall, it has presented significant challenges with regard to energy costs and overall inflation in manufacturing input costs. Respondents expect cost pressures to subside somewhat in the second half of 2008 based on their overall price forecast.”
Respondents indicated they were operating at 82.9 percent of their normal capacity, up from 82.8 percent in April 2007.
Capital expenditures are expected to increase by 0.7 percent, compared to the 18.2 percent increase in 2007.
“Although 0.7 is much smaller than the 18.2 percent from 2007, it doesn’t represent a drop off in spending,” explains Ore. “We expect that companies will continue to invest at the current rate.”
Inventories will be reduced in an attempt to decrease purchased inventory-to-sales ratio in 2008.
Employment is expected to grow by 1.6 percent, while labor and benefits costs are expected to rise by 2.5 percent.
Survey respondents also expect strong growth in both exports and imports, as well as a continued weakening of the U.S. dollar.
Prices paid should rise by 3.3 percent in the first four months of 2008, and increase one percent during the balance of 2008, for an overall increase of 4.3 percent.
The major concerns for the upcoming year include: energy cost and supply; weak dollar; inflation; housing; and commodity prices.
“2007 was a reasonable year for manufacturing. There was great capital expenditure, and industries like petrochemical and machinery benefited from strength in petroleum, a strong global economy, and a weak dollar,” Ore added. “On the other hand, industries like fabricated metals and others that are tied to the housing industry suffered. However, the effects of housing should bottom out and we should see a recovery in the second half of 2008.”
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