The Institute for Supply Management provides a semiannual forecast that distributors can use to gauge the health and expectations of manufacturing and non-manufacturing industries. This article provides the highlights from the latest forecast, which was released at the end of May.

U.S. economic growth is expected to continue throughout the remainder of 2017, say the nation’s purchasing and supply executives in their Spring 2017 Semiannual Economic Forecast.

Expectations for the remainder of 2017 continue to be positive in both the manufacturing and non-manufacturing sectors.

Manufacturing summary

Sixty-four percent of respondents from the panel of manufacturing supply management executives predict their revenues will be 8.5 percent greater in 2017 compared to 2016, 12 percent expect a 9.6 percent decline, and 24 percent foresee no change in revenue.

This yields an overall average forecast of 4.4 percent revenue growth among manufacturers for 2017. This current prediction is 0.2 percentage point below the December 2016 forecast of 4.6 percent revenue growth for 2017, but is 3.5 percentage points above the actual revenue growth reported for all of 2016.

With operating capacity at 82.5 percent, an expected capital expenditure increase of 5.2 percent, an increase of 2.5 percent for prices paid for raw materials, and employment expected to increase by 1.3 percent by the end of 2017 compared to the end of 2016, manufacturing is positioned to grow revenues while managing costs through the remainder of the year.

The 17 industries reporting expectations of growth in revenue for 2017 – listed in order – are: Electrical Equipment, Appliances & Components; Textile Mills; Computer & Electronic Products; Furniture & Related Products; Apparel, Leather & Allied Products; Primary Metals; Paper Products; Fabricated Metal Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Plastics & Rubber Products; Machinery; Chemical Products; Wood Products; Nonmetallic Mineral Products; and Printing & Related Support Activities.

The manufacturing panel was also asked special questions related to the impact thus far in 2017 on the following:

Is your organization actively offshoring or reshoring “significant” volumes of manufacturing? What is the main reason?

Nearly one-fifth (18.5 percent) of respondent said they are actively offshoring (18.5 percent); 9.9 percent are actively reshoring; and 71.6 percent are actively doing neither.

The reasons given by those who are actively offshoring were: cost advantage of host country(ies) we will use going forward (81.4 percent); shortage of usable plant/asset capacity in the U.S. (7 percent); other (11.6 percent).

Since the national election last November, has your firm increased, decreased or left unchanged its capital spending plans for this year?

Answers included: increased capital spending plans (19.7 percent); decreased capital spending plans (6 percent); no change in capital spending plans (74.2 percent).

The reasons given by those who are increasing their capital spending plans were: general business outlook (71.7 percent); prospects for regulatory reform (17.4 percent); other (10.9 percent).

Over the past six months, has your firm seen a change in its pricing power?

Answer provided were: yes, our firm has more pricing power than it did six months ago (18.3 percent); no, our firm has less pricing power than it did six months ago (21.7 percent); our firm has seen no pricing power change over the past six months (46.5 percent); unsure (13.5 percent).

Do you believe your supply chain will be able to meet your company’s 2017 delivery needs?

Nearly all respondents (96.6 percent) believe their supply chain will be able to meet their needs.

Non-manufacturing summary

Fifty percent of non-manufacturing purchasing and supply executives expect their 2017
revenues to be greater by 10.6 percent as compared to 2016. Respondents currently expect a 4.1 percent net increase in overall revenues, which is the same as forecasted in December 2016.

“Non-manufacturing companies continue to operate very efficiently as reflected by the high percentage of capacity utilization,” said Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee.

“Supply managers have indicated that overall prices are projected to increase 1.5 percent over the year. Overall employment is projected to grow 2.2 percent. Fourteen out of 18 industries are forecasting increased revenues, which is more than the 13 industries that forecasted increased revenues last year. The non-manufacturing sector will continue economic growth throughout the year.”

The 14 non-manufacturing industries expecting increases in revenue in 2017 – listed in order – are: Information; Wholesale Trade; Construction; Retail Trade; Finance & Insurance; Arts, Entertainment & Recreation; Health Care & Social Assistance; Professional, Scientific & Technical Services; Mining; Utilities; Accommodation & Food Services; Agriculture, Forestry, Fishing & Hunting; Educational Services; and Transportation & Warehousing.

The non-manufacturing panel was also asked special questions related to the impact thus far in 2017 on the following:

Is your organization actively offshoring or reshoring “significant” volumes of manufacturing? What is the main reason?

Most respondents (79.7 percent) indicated they are actively doing neither; 13.7 percent are actively offshorting; and 6.6 percent are actively reshoring.

The reasons given by those who are actively offshoring were: cost advantage of host country(ies) we will use going forward (80 percent); shortage of applicable labor in the current host country (8 percent); other (12 percent).

Since the national election last November, has your firm increased, decreased or left unchanged its capital spending plans for this year?

Answers included: increased capital spending plans (20.1 percent); decreased capital spending plans (8.2 percent); no change in capital spending plans (71.7 percent).

The reasons given by those who are increasing their capital spending plans were: general business outlook (70.3 percent); prospects for regulatory reform (13.5 percent); other (16.2 percent).

Over the past six months, has your firm seen a change in its pricing power?

Answer provided were: yes, our firm has more pricing power than it did six months ago (13.1 percent); no, our firm has less pricing power than it did six months ago (21.9 percent); our firm has seen no pricing power change over the past six months (50.3 percent); unsure (14.8 percent).

Do you believe your supply chain will be able to meet your company’s 2017 delivery needs?

Nearly all respondents (96.8 percent) believe their supply chain will be able to meet their needs.

Employment Outlook for 2017

The table below shows the percentage of respondents to the ISM survey who expected higher, same or lower employment levels for the 2017 (year-over-year).