US manufacturing, services to boost revenues this year - ISM

08 May 2012 19:25  [Source: ICIS news]

WASHINGTON (ICIS)--The US economy will continue to expand through the rest of this year, with overall gains in 2012 expected to be nearly 5% better than last year for both manufacturing and non-manufacturing business, a leading survey reported on Tuesday.

In its semi-annual economic forecast, the Institute for Supply Management (ISM) said that two-thirds of its member purchasing and supply executives in manufacturing said they expect revenues to be 9.5% better this year than in 2011.

Offsetting that positive outlook somewhat, 15% of manufacturing executives responding to the institute’s survey said they expect revenue declines of as much as 12% this year, while nearly 20% expect no change.

“This yields an overall average expectation of 4.5% revenue growth among manufacturers in 2012,” said Bradley Holcomb, chairman of the institute’s survey committee.

He said that with the nation’s manufacturing capacity at 81.6%, a 6.2% increase in capital expenditures for this year and little increase in raw materials costs expected for the balance of 2012, “manufacturers are poised to grow revenues and contain costs through the remainder of the year”.

Holcomb said that 16 of the 18 manufacturing industries tracked by the institute predicted growth this year ahead of the 2011 pace, including chemicals producers and the plastics and rubber sector.

Perhaps more significantly in terms of the broader US economy, ISM said that its survey of non-manufacturing purchasing and supply executives also indicates a better performance this year from 2011.

He said that “55% of non-manufacturing and supply executives expect their 2012 revenues to be greater by 9.9% than in 2011”.

Balancing that more optimistic reading with those among non-manufacturing executives who expect no change or some decline, Holcomb said the overall outlook was for a 4.8% net increase in revenues this year.

While US manufacturing industries have seen more or less steady if modest improvement since the end of the recession in June 2009, many non-manufacturing sectors, especially housing, have been struggling to deliver growth. Consequently, the institute's forecast of increased revenue gains for 2012 in this area is seen to bode well for the US economy overall.

Among the 17 non-manufacturing industries tracked by ISM are information services, finance, agriculture, forestry, retail trade, entertainment and recreation, real estate, health care, and hotel and food services sectors.

The institute’s report of a more positive outlook for the US economy for the rest of 2012 is in contrast to several recent reports suggesting that the recovery could be at risk of stalling.

The Commerce Department reported that US first quarter gross domestic product (GDP) growth fell to 2.2% from the 3% pace seen in the fourth quarter 2011, US sales of existing homes fell in March, and a real-time measure of commercial shipments slipped in April.

In addition, US job growth eased in April for the third consecutive month.

But the institute’s survey suggests that those declining numbers in workforce expansion may be temporary.

Holcomb said the ISM survey indicates that manufacturers will increase hiring by 1.4% in the balance of this year while the non-manufacturing sector is expected to boost employment by nearly 2%.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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