The manufacturing sector continues to outpace the non-manufacturing sector

Source: ISM

Dec 28, 2010

Economic growth in the United States will continue in 2011, say the nation's purchasing and supply management executives in their December 2010 Semiannual Economic Forecast. Expectations are for a continuation of the economic recovery that began in mid-2009. The manufacturing sector continues to outpace the non-manufacturing sector and has greater expectations for growth in terms of revenue, say the nation's purchasing and supply management executives in their December 2010 Semiannual Economic Forecast. The overall forecast projects optimism about the U.S. economy for 2011. The manufacturing sector, overall, is positive about prospects in 2011 with revenues expected to increase in 16 of 18 industries, while the non-manufacturing sector appears slightly less positive about the year ahead, with 12 of 18 industries expecting higher revenues. Business investment, a major driver in the U.S. economy, will increase substantially in the manufacturing sector, while investment in the non-manufacturing sector will increase at a lower level.

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 Norbert J. Ore, CPSM, C.P.M., chair of the ISM Manufacturing Business Survey Committee; and by Anthony S. Nieves, C.P.M., CFPM, chair of the ISM Non-Manufacturing Business Survey Committee.

Expectations for 2011 are positive as 65% of survey respondents expect revenues to be greater in 2011 than in 2010. The panel of purchasing and supply executives expects a 5.6% net increase in overall revenues for 2011, compared to a 7.9% increase reported for 2010. The 16 manufacturing industries expecting improvement over 2010 — listed in order — are: Primary Metals; Fabricated Metal Products; Petroleum and Coal Products; Apparel, Leather and Allied Products; Transportation Equipment; Miscellaneous Manufacturing; Furniture and Related Products; Plastics and Rubber Products; Machinery; Textile Mills; Wood Products; Electrical Equipment, Appliances and Components; Food, Beverage and Tobacco Products; Printing and Related Support Activities; Chemical Products; and Paper Products.

"Manufacturing purchasing and supply executives have expectations for continued growth and are optimistic about their organizations' prospects as they consider the first half of 2011, and they are even more positive about the second half," said Ore. "While 2010 has been a year of recovery in manufacturing, our forecast sees improvements in both investment and employment in 2011. Respondents expect cost pressures in 2011 to be somewhat greater than in 2010. Manufacturing growth is now in its 16th consecutive month as measured by and reported in the monthly Manufacturing ISM Report On Business."

In the manufacturing sector, respondents report operating at 80.2% of their normal capacity, up from 72.8% reported in April 2010. Purchasing and supply executives predict that capital expenditures will increase by 14.5% in 2011, compared to a 5.9% increase reported for 2010. Survey respondents also forecast that they will reduce inventories in an effort to improve their purchased inventory-to-sales ratio in 2011. Manufacturers have an expectation that employment in the sector will increase by 1.8%, while labor and benefits costs are expected to increase an average of 1.9% in 2011. Manufacturing purchasers are predicting strength in exports and imports in 2011. They also expect the U.S. dollar to weaken on average against the currencies of major trading partners.

The panel also predicts the prices they pay will increase 2.7% during the first four months of 2011, and will increase an additional 1.3% during the balance of the year, with an overall increase of 4% for 2011. Survey respondents expect to realize supply chain improvements through improved inventory/asset management; cost reduction; supplier development/better metrics; supplier consolidation; and better risk management.

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