Manufacturing to grow 5.7% in 2010

Source: Material Handling Industry of America

Dec 11, 2009

Economic growth in the United States will resume in 2010, according to the Institute for Supply Management (ISM) in its December 2009 Semiannual Economic Forecast. Manufacturing revenues will grow 5.7% in 2010 compared to a 10.7% decrease in 2009. Expectations for 2010 are for the positive conditions experienced in the second half of 2009 to continue in manufacturing, while the non-manufacturing sector foresees marginal growth.

The overall forecast projects optimism about the U.S. economy for 2010. The manufacturing sector overall is positive about prospects in 2010, with revenues expected to increase in 13 of 18 industries, while the non-manufacturing sector appears slightly less positive about the year ahead with 8 of 18 industries expecting higher revenues. Business investment, a major driver in the U.S. economy, will decline as both sectors expect a combined average of a 5.4% decline in capital spending.

In the manufacturing sector, respondents report operating at 70.1% of its normal capacity, up from 67% reported in April 2009. Purchasing and supply executives predict that capital expenditures will decrease by 4% in 2010, compared to a 7.8% decrease reported for 2009. Survey respondents also forecast that they will reduce inventories in an effort to improve their purchased inventory-to-sales ratio in 2010. Manufacturers have an expectation that employment in the sector will increase by 1.5%, while labor and benefits costs are expected to increase an average of 1.4% in 2010. Manufacturing purchasers are predicting strength in exports and imports in 2010. They also expect the U.S. dollar to weaken on average against the currencies of major trading partners.

Purchasing and supply executives are more optimistic about the second half of 2010 compared to the first half of the year. The percentage of survey respondents who forecast the second half of 2010 to be better than the first half is 50%, while 3% expect it to be worse and 47% expect no change.

The panel also predicts the prices they pay will increase 0.2% during the first four months of 2010, and will increase an additional 2.4% during the balance of 2010, with an overall increase of 2.6% for 2010. Respondents' major concerns are: weak economy, credit crisis, taxes, interest rates and high energy costs. Survey respondents expect to realize supply-chain improvements through supplier consolidation; new or improved enterprise technology and system utilization; improved inventory/asset management; lean manufacturing; and cost reduction.

To view the full report, click here.