The 2020 Mid-Year Economic Update_long

ISM Forecast: Economic Expansion to Continue in 2006

Economic growth in the U.S. will continue in the second half of 2006, say the nation’s purchasing and supply management executives in their spring 2006 Semiannual Economic Forecast. The projections are part of the forecast issued by the Business Survey Committee of the Institute for Supply Management (ISM).


Expectations for 2006 remain high as 72 percent of manufacturing survey respondents forecast revenues to be greater in 2006 than in 2005. Expectations are higher overall as the panel of purchasing and supply executives now expects a 6.6 percent net increase in overall revenues for 2006 compared to their December 2005 forecast of 5.4 percent.


Industries expecting above average improvement in 2006 are: Apparel; Electronic Components & Equipment; Glass, Stone & Aggregate; Food; Primary Metals; Instruments & Photographic Equipment; and Industrial & Commercial Equipment & Computers.


Capital Expenditures Prediction Moderates
Manufacturing supply executives expect capital expenditures to rise 6.1 percent in 2006. This is a significant revision in expectations when compared to the prediction of 9 percent in the December 2005 forecast for 2006.


Industries showing the largest increases (5% or more) in capital expenditures for 2006 ‘ in order of percentage increase ‘ are: Industrial & Commercial Equipment & Computers; Glass, Stone & Aggregate; Transportation & Equipment; Primary Metals; Fabricated Metals; Apparel; and Instruments & Photographic Equipment.


Non-manufacturing purchasing and supply executives are expecting to increase their level of capital expenditures 7.8 percent in 2006 compared to 2005.


Prices Predicted Changes 2005 to 2006
The forecast indicates manufacturing respondents predict a net average increase of 4.2 percent between December 2005 and December 2006, indicating they expect price increases to moderate during the period of May 2006 through December 2006 at a rate of 0.2 percent. Seventy-four percent expect an average price increase of 6.7 percent, while 12 percent expect an average decline of 5.6 percent. The remaining 14 percent expect no change in their average prices paid for the year. Industries expecting to pay above average prices by the end of 2006 are: Primary Metals; Furniture; Glass, Stone & Aggregate; Fabricated Metals; Rubber & Plastic Products; Paper; and Food.


Looking out to the end of 2006, non-manufacturing purchasers expect prices they pay to increase by 5.3 percent over the entire year. Seventy-six percent of purchasers anticipate price increases averaging 7.8 percent. Eight percent of purchasers expect decreased prices with an average reduction of 8 percent, and 16 percent of members do not expect prices to change.


For the full forecast from the Institute for Supply Management, go to www.ism.ws.

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