TEMPE, Ariz., Dec. 9, 2014 — Economic growth in the United States will continue in 2015, say the nation’s purchasing and supply management executives in their December 2014 Semiannual Economic Forecast.
Manufacturing Growth Expected in 2015: Revenue to Increase 5.6%; Capital Expenditures to Increase 3.7%; Capacity Utilization Currently at 83.7%
Non-Manufacturing Growth Projected in 2015: Revenue to Increase 10%; Capital Expenditures to Increase 3.8%; Capacity Utilization Currently at 87.6%
Expectations are for a continuation of the economic recovery that began in mid-2009, as indicated in the monthly ISM® Report On Business®. The Manufacturing sector is optimistic about growth in 2015, with revenues expected to increase in 15 Manufacturing industries, and the Non-Manufacturing sector also predicts that 15 of its industries will see higher revenues. Capital expenditures, a major driver in the U.S. economy, are expected to increase by 3.7 percent in the Manufacturing sector and by 3.8 percent in the Non-Manufacturing sector. Manufacturing expects that its employment base will grow by 1.5 percent, while Non-Manufacturing expects employment growth of 1.7 percent.
These projections are part of the forecast issued by the Business Survey Committee of the Institute for Supply Management® (ISM®). The forecast was released today by Bradley J. Holcomb, CPSM, CPSD, chair of the ISM Manufacturing Business Survey Committee, and by Anthony S. Nieves, CPSM, C.P.M., CFPM, chair of the ISM Non-Manufacturing Business Survey Committee.
Manufacturing Summary
Expectations for 2015 are positive as 67 percent of survey respondents expect revenues to be greater in 2015 than in 2014. The panel of purchasing and supply executives expects a 5.6 percent net increase in overall revenues for 2015, compared to a 3.6 percent increase reported for 2014 over 2013 revenues. The 15 manufacturing industries expecting revenue improvement in 2015 over 2014 — listed in order — are: Food, Beverage & Tobacco Products; Furniture & Related Products; Computer & Electronic Products; Fabricated Metal Products; Miscellaneous Manufacturing; Machinery; Nonmetallic Mineral Products; Printing & Related Support Activities; Paper Products; Chemical Products; Transportation Equipment; Textile Mills; Primary Metals; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components.
“Manufacturing purchasing and supply executives expect to see continued growth in 2015. They are optimistic about their overall business prospects for the first half of 2015, and are similarly optimistic about the second half of 2015,” said Holcomb. “Manufacturing experienced 18 consecutive months of growth from June 2013 through November 2014, as reported in the monthly Manufacturing ISM Report On Business®, and our forecast calls for a continuation of growth in 2015, building on the momentum reported in 2014. Respondents expect raw materials pricing pressures in 2015 to be low, similar to levels experienced in 2014, and expect their margins will improve in 2015. Manufacturers are also predicting growth in both exports and imports in 2015 over 2014.”
In the manufacturing sector, respondents report operating at 83.7 percent of their normal capacity, up 1.4 percentage points from the 82.3 percent reported in April 2014. Purchasing and supply executives predict that capital expenditures will increase by 3.7 percent in 2015 over 2014, compared to a 14.7 percent increase reported for 2014 over 2013. Manufacturers have an expectation that employment in the sector will increase by 1.5 percent in 2015, while labor and benefit costs are expected to increase an average of 3.2 percent. Respondents also expect the U.S. dollar to strengthen against all seven currencies of major trading partners in 2015.
The panel also predicts the prices paid for raw materials will increase 1.2 percent during the first four months of 2015, and will increase an additional 0.3 percent during the balance of the year, with an overall increase of 1.5 percent for 2015. This compares to a reported 1.4 percent increase in raw materials prices for 2014 compared with 2013.
Two special questions were asked of our Panel. The first special question asks about unfilled job openings. The top three responses from our Manufacturing panel, with percentages of the total number of responses noted, were “Currently have a typical number of unfilled job openings” (39.5%), “Cannot find enough qualified applicants to fill job openings” (28.8%), and “Hiring less than usual due to economic uncertainty” (18.6%).
The second special question asked whether Manufacturing organizations plan to re-shore significant volumes of manufacturing/business processes in 2015. Of the three possible answers, 10.4 percent responded “Yes,” 58.8 percent responded “No,” and 30.8 percent responded “Not Applicable.” For those organizations that responded “No,” the most often cited main reason for not re-shoring in 2015 was that the “Cost advantage of off-shoring was still too favorable,” with 53.7 percent of all respondents providing that reason.
Non-Manufacturing Summary
Sixty-two percent of non-manufacturing supply management executives expect their 2015 revenues to be greater than in 2014. They currently expect a 10 percent net increase in overall revenues for 2015 compared to a 5.1 percent increase reported for 2014 over 2013 revenues. The 15 non-manufacturing industries expecting revenue improvement in 2015 over 2014 — listed in order — are: Wholesale Trade; Professional, Scientific & Technical Services; Transportation & Warehousing; Construction; Other Services; Mining; Retail Trade; Accommodation & Food Services; Arts, Entertainment & Recreation; Public Administration; Real Estate, Rental & Leasing; Utilities; Health Care & Social Assistance; Finance & Insurance; and Information.
“Non-manufacturing supply managers report operating at 87.6 percent of their normal capacity, higher than the 86.3 percent reported in April 2014. They are optimistic about continued growth in the first half of 2015 compared to the second half of 2014, and they have a higher level of optimism about the next 12 months than they had last December for 2014,” said Nieves. “They forecast that their capacity to produce products and provide services will rise by 4.3 percent during 2015, and capital expenditures will increase by 3.8 percent from 2014 levels. Non-manufacturers also predict their employment will increase by 1.7 percent during 2015.”
Respondents in non-manufacturing industries expect the prices they pay for materials and services will increase by 2.5 percent during 2015. They also forecast their overall labor and benefit costs will increase 2.1 percent in 2015. Profit margins are reported to have increased in the second and third quarters of 2014, and respondents expect them to increase between now and April 2015.
Two special questions were asked of our Panel. The first special question was in response to some organizations that reported having more unfilled job openings than usual in 2014. The top three responses from our Non-Manufacturing panel, with percentages of the total number of responses noted, were “Currently have a typical number of unfilled job openings” (46.5%), “Cannot find enough qualified applicants to fill job openings” (19.1%), and “Hiring less than usual due to economic uncertainty” (15.9%).
The second special question asked whether Non-Manufacturing organizations plan to re-shore significant volumes of manufacturing/business processes in 2015. Of the three possible answers, 8.1 percent responded “Yes,” 36 percent responded “No,” and 55.9 percent responded “Not Applicable.” For those organizations that responded “No,” the most often cited main reason for not re-shoring in 2015 was that the “Cost advantage of off-shoring was still too favorable,” with 52.1 percent of all respondents providing that reason.
SUMMARY
Manufacturing
The manufacturing sector is currently expanding, and the forecast indicates that it will continue to expand in the first half of 2015, and expand at about the same rate in the second half of 2015.
– Operating rate is currently at 83.7 percent.
– Production capacity increased by 5.3 percent in 2014.
– Production capacity is expected to increase by 5.6 percent in 2015.
– Capital expenditures increased 14.7 percent in 2014.
– Capital expenditures are expected to increase 3.7 percent in 2015.
– Prices paid increased 1.4 percent in 2014.
– Overall 2015 prices paid are expected to increase 1.5 percent.
– Labor and benefit costs are expected to increase 3.2 percent in 2015.
– Manufacturing employment is expected to increase 1.5 percent in 2015.
– Expect growth in U.S. exports in 2015.
– Expect growth in U.S. imports in 2015.
– Manufacturing revenues (nominal) are up 3.6 percent in 2014.
– Manufacturing revenues (nominal) are expected to increase 5.6 percent in 2015.
– The U.S. dollar is expected to strengthen versus all major trading partner currencies in 2015.
Overall attitude of manufacturing supply managers: optimistic outlook, with 93 percent of respondents predicting 2015 will be the same as or better than 2014.
Non-Manufacturing
The non-manufacturing sector continues to expand, and the forecast indicates an increased rate of expansion in 2015.
– Operating rate is currently at 87.6 percent.
– Production capacity increased 3.6 percent in 2014.
– Production and provision capacity is expected to increase 4.3 percent in 2015.
– Capital expenditures increased 3.3 percent in 2014.
– Capital expenditures are expected to increase 3.8 percent in 2015.
– Prices paid increased 1.7 percent in 2014.
– Prices paid are expected to increase 2.5 percent in 2015.
– Labor and benefit costs are expected to increase 2.1 percent in 2015.
– Non-manufacturing employment is expected to increase 1.7 percent in 2015.
– Expect export levels to increase in 2015.
– Expect import growth in 2015.
– Non-manufacturing revenues (nominal) are up 5.1 percent in 2014.
– Non-manufacturing revenues (nominal) are expected to rise 10 percent in 2015.
Overall attitude of non-manufacturing supply managers: mostly positive outlook, with 89 percent of respondents predicting 2015 will be the same as or better than 2014.
The full text version of each report is posted on ISM’s Home Page at www.ism.ws on the first and third business days of every month after 10:00 a.m. (ET).
