Economic growth is expected to continue in the U.S. throughout the remainder of 2012, say purchasing and supply executives in their spring 2012 Semiannual Economic Forecast. Expectations for the remainder of 2012 continue to be positive in both the manufacturing and non-manufacturing sectors. These projections are part of the forecast issued by the Institute for Supply Management.

Manufacturing Sector Summary

Sixty-six percent of respondents forecast revenues will be 9.5 percent greater in 2012, 15 percent expect a 12.1 percent decline, and 19 percent foresee no change. This yields an overall average expectation of 4.5 percent revenue growth among manufacturers in 2012, which is a modest reduction of 1 percentage point from December 2011.

Non-manufacturing Summary

Fifty-five percent of non-manufacturing purchasing and supply executives expect their 2012 revenues to be greater by 9.9 percent than in 2011. Overall, respondents currently expect a 4.8 percent net increase in overall revenues, which is greater than the 3.1 percent increase that was forecast in December 2011.

More details from the semiannual report:

Operating Rate

Manufacturing purchasing and supply managers report that their companies are currently operating at 81.6 percent of normal capacity, representing an increase from the 79.2 percent reported in December 2011, and a decrease from the 83.2 percent reported in April 2011.

Non-manufacturing purchasing and supply executives report that their organizations are currently operating at 85.2 percent of normal capacity.

Production Capacity

Production capacity in manufacturing is expected to increase 5.2 percent in 2012. This increase is slightly less than the 5.6 percent increase predicted in December 2011 for 2012, but greater than the 4.6 percent increase reported in December for 2011. This reflects the continuing strength in the sector as 47 percent of respondents expect an average capacity increase of 14.1 percent, 8 percent expect decreases averaging 19.1 percent, and 45 percent expect no change.

The capacity to produce products or provide services in the non-manufacturing sector is expected to increase 3.3 percent during 2012.

Capital Expenditures

Manufacturing survey respondents expect a 6.2 percent increase in capital expenditures in 2012. This is greater than the December 2011 forecast when members predicted an increase of 1.9 percent. Currently, 42 percent predict increased capital expenditures in 2012, with an average increase of 23.4 percent, while the 13 percent who said their capital spending would decrease expect an average decrease of 25.8 percent. Forty-five percent say they will spend the same.

Non-manufacturing purchasing and supply executives are expecting to increase their level of capital expenditures 3.6 percent in 2012 compared to 2011.

Price

The 55 percent of manufacturing respondents who say their prices are higher now than at the end of 2011 report an average increase of 5 percent, while the 19 percent who report lower prices report an average decrease of 4.2 percent. The remaining 26 percent indicate no change for the period.

When asked to predict 2012 price changes, 61 percent of respondents expect the prices they pay to increase by 5.3 percent for the full year of 2012 compared to the end of 2011.

Non-manufacturing respondents report that their purchases in the first four months of this year cost an average of 1.8 percent more than they cost at the end of 2011.

Employment

Manufacturing respondents forecast that employment will increase 1.4 percent during the balance of 2012, with 45 percent expecting employment to be 5.6 percent higher.

Non-manufacturing respondents forecast that employment will increase 1.9 percent during the balance of 2012.

Business Revenues

Looking ahead, expectations by manufacturing respondents are for increased revenues in 2012  an overall net nominal increase of 4.5 percent in business revenues for 2012 over 2011. Sixty-six percent of respondents say that nominal revenues (before adjusting for inflation) for 2012 will increase an average of 9.5 percent over 2011. 

Non-manufacturing respondents forecast that business revenues for 2012 will increase 4.8 percent compared to 2011.