Economic growth is expected to continue in the U.S. throughout the remainder of 2011, say purchasing and supply executives in their spring 2011 Semiannual Economic Forecast.
Expectations for the remainder of 2011 have improved in both the manufacturing and non-manufacturing sectors.
These projections are part of the forecast issued by the Business Survey Committee of the Institute for Supply Management.
Manufacturing Sector Summary
Sixty-eight percent of respondents forecast revenues will be 13.2 percent greater in 2011, 12 percent expect a 13.2 percent decline, and 20 percent foresee no change. This yields significant expectations for growth in 2011, as manufacturers’ net revenues are expected to increase 7.5 percent.
This represents an improvement in expectations from December 2010 when the panel of supply management executives predicted a 5.6 percent increase in 2011 revenues compared to 2010.
Fifty percent of non-manufacturing purchasing and supply executives, which includes wholesale trade, expect their 2011 revenues to be greater by 9.3 percent than in 2010.
Overall, respondents currently expect a 2.1 percent net increase in overall revenues, which is lower than the 3.4 percent increase that was forecast in December 2010.
More details from the semiannual report:
Manufacturing purchasing and supply managers report that their companies are currently operating at 83.2 percent of normal capacity, representing an increase from the 80.2 percent reported in December 2010 and the 72.8 percent reported in April 2010, and the highest since December 2006 when operating capacity was at 84.5 percent.
Production capacity in manufacturing is expected to increase 8.1 percent in 2011. This increase is greater than the 5.2 percent increase predicted in December 2010 for 2011, and the 7.5 percent increase reported in December for 2010. This reflects the continuing strength in the sector as 45 percent of respondents expect an average capacity increase of 18.6 percent, 3 percent expect decreases averaging 10.3 percent, and 52 percent expect no change.
Manufacturing survey respondents expect a 17.9 percent increase in capital expenditures in 2011 over 2010. This is greater than the December 2010 forecast when members predicted an increase of 14.5 percent for 2011.
Currently, 39 percent of respondents predict increased capital expenditures in 2011, with an average increase of 53.3 percent, while the 11 percent who said their capital spending would decrease expect an average decrease of 28.9 percent. Fifty percent say they will spend the same.
In the December 2010 forecast, manufacturing respondents predicted an increase of 2.7 percent in prices paid during the first four months of 2011; however, they now report prices have increased 6.1 percent for the period. The 85 percent who say their prices are higher now than at the end of 2010 report an average increase of 7.4 percent, while the 5 percent who report lower prices report an average decrease of 3.8 percent. The remaining 10 percent indicate no change.
When asked to predict 2011 price changes, 83 percent of respondents expect the prices they pay to increase by 9.1 percent compared to the end of 2010. Five percent expect decreases averaging 4.1 percent. Including the 12 percent who expect no change in prices, survey respondents expect net average prices to increase 7.4 percent for the entire year of 2011, indicating that prices are expected to rise an additional 1.3 percent for the remainder of the year.
Non-manufacturing respondents report that their purchases in the first four months of this year cost an average of 4.1 percent more than they cost at the end of 2010. Seventy-four percent of the non-manufacturing respondents report the prices they paid increased an average of 5.8 percent in the first part of 2011.
ISM’s Manufacturing Business Survey respondents forecast that manufacturing employment will increase 2.9 percent during the balance of 2011, with 42 percent expecting employment to be 8.4 percent higher.
Looking ahead, expectations by manufacturing respondents are for increased revenues in 2011 as purchasing and supply management executives indicate an overall net nominal increase of 7.5 percent in business revenues for 2011 over 2010. This is a greater increase than the 5.6 percent increase that was forecast in December 2010 for all of 2011, but not as much as the 7.9 percent increase reported for 2010. Sixty-eight percent of respondents say that nominal revenues (before adjusting for inflation) for 2011 will increase an average of 13.2 percent over 2010. Conversely, 12 percent say their nominal revenues will decrease an average of 13.2 percent, and the remaining 20 percent indicate no change.