ISM Reports Economic Growth Will Continue In 2020 - Modern Distribution Management

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ISM Reports Economic Growth Will Continue In 2020

Revenues are expected to increase in all 18 manufacturing industries.

Economic growth in the United States will continue in 2020, say the nation's purchasing and supply management executives in the December 2019 Semiannual Economic Forecast. Expectations are for a continuation of the growth that began in mid-2009, as indicated in the monthly ISM Report On Business. The manufacturing sector is optimistic about growth in 2020, with revenues expected to increase in all 18 manufacturing industries, and the non-manufacturing sector also indicates that 17 of its industries will see higher revenues. Capital expenditures are expected to decrease by 2.1% in the manufacturing sector (after 6.4% growth in 2019) and increase by 3.4% in the non-manufacturing sector. Manufacturing expects that its employment base will grow slightly, by 0.1%, while the outlook for the next 12 months is predominately growth oriented. 

These projections are part of the forecast issued by the Business Survey Committee of Institute for Supply Management. The forecast was released today by Timothy R. Fiore, CPSM, C.P.M, Chair of the ISM Manufacturing Business Survey Committee, and by Anthony S. Nieves, CPSM, C.P.M., A.P.P, CFPM, Chair of the ISM Non-Manufacturing Business Survey Committee.

Expectations for 2020 are positive, as 58% of survey respondents expect revenues to be greater in 2020 than in 2019. The panel of purchasing and supply executives expects a 4.8-percent net increase in overall revenues for 2020, compared to a 1.9-percent increase predicted for 2019 over 2018 revenues. All 18 manufacturing industries expect revenue improvement in 2020 over 2019, listed in order: Fabricated Metal Products; Food, Beverage & Tobacco Products; Apparel, Leather & Allied Products; Paper Products; Furniture & Related Products; Chemical Products; Wood Products; Computer & Electronic Products; Miscellaneous Manufacturing; Machinery; Transportation Equipment; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Primary Metals; Printing & Related Support Activities; Textile Mills; Petroleum & Coal Products; and Nonmetallic Mineral Products.

"Manufacturing purchasing and supply executives expect to see growth in 2020. They are optimistic about their overall business prospects for the first half of 2020, with business continuing to expand through the second half of 2020. Manufacturing experienced eight consecutive months of growth from December 2018 through July 2019. However, manufacturing contracted during the period from August 2019 through November 2019. This resulted in an average PMI® of 51.8%, as compared to 59.2% for the 12 months ending November 2018, as reported in the monthly Manufacturing ISM Report On Business®. Respondents expect raw materials pricing pressures in 2020 to increase and expect profit margins to improve in 2020 over 2019. Manufacturers are also predicting growth in both exports and imports in 2020," says Fiore. 

In the manufacturing sector, respondents report operating at 83.7% of their normal capacity, down 0.5%age point from the 84.2% reported in May 2019. Purchasing and supply executives predict that capital expenditures will decrease by 2.1% in 2020 over 2019, compared to the 6.4-percent increase reported for 2019 over 2018. Manufacturers expect employment in the sector to grow by 0.1% in 2020 relative to December 2019 levels, while labor and benefit costs are expected to increase an average of 0.7% in 2020. Respondents also expect the U.S. dollar to strengthen against all seven currencies of major trading partners in 2020, as was the case in 2019.

The panel predicts the prices paid for raw materials will increase by 0.4% during the first five months of 2020, with an overall increase of 1.1% for 2020. This compares to a reported 0.7% increase in raw materials prices for 2019 compared with 2018.

Manufacturing purchasing and supply executives report their companies are currently operating at 83.7% of normal capacity. This is a 0.5-percentage point decrease when compared to May 2019 (84.2%), and a decrease when compared to December 2018 (85.2%). The following 10 industries — listed in order — are operating at or above the average rate of 83.7%: Wood Products; Paper Products; Petroleum & Coal Products; Apparel, Leather & Allied Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Machinery; Transportation Equipment; and Chemical Products.


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