Economic Recovery Continues in 2010
Economic activity in the manufacturing sector expanded in November for the fourth consecutive month, and the overall economy grew for the seventh consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.
Expectations for 2010 are for the positive conditions experienced in the second half of 2009 to continue in manufacturing, while the nonmanufacturing sector foresees marginal growth, according to the ISM report. The overall forecast projects optimism about the U.S. economy for 2010. The manufacturing sector overall is positive about prospects in 2010 with revenues expected to increase in 13 of 18 industries, while the nonmanufacturing sector appears slightly less positive about the year ahead with 8 of 18 industries expecting higher revenues. Business investment, a major driver in the U.S. economy, will decline as both sectors expect a combined average of a 5.4% decline in capital spending.
These projections are part of the forecast issued by the Business Survey Committee of the Institute for Supply Management (ISM). The forecast was released by Norbert J. Ore, CPSM, C.P.M., chair of the ISM Manufacturing Business Survey Committee; and by Anthony S. Nieves, C.P.M., CFPM, chair of the ISM Non-Manufacturing Business Survey Committee, and senior vice president - supply management, Hilton Worldwide.
Manufacturing expectations for 2010 are positive as 60% of survey respondents expect revenues to be greater in 2010 than in 2009. The panel of purchasing and supply executives expects a 5.7% net increase in overall revenues for 2010, compared to a 10.7% decrease reported for 2009.
"Manufacturing purchasing and supply executives reflect more of their typical optimism about their organizations' prospects as they consider the first half of 2010,and they are even more positive about the second half," says Ore. "While 2009 has been a challenging year overall, we are in a growth trend as we approach the end of the year. Respondents expect cost pressures to be low to moderate based on their price forecast. Manufacturing growth is now in its fourth consecutive month as measured by and reported in the monthly Manufacturing ISM Report On Business."
In the manufacturing sector, respondents report operating at 70.1% of their normal capacity, up from 67% reported in April 2009. Purchasing and supply executives predict that capital expenditures will decrease by 4% in 2010, compared to a 7.8% decrease reported for 2009. Survey respondents also forecast that they will reduce inventories in an effort to improve their purchased inventory-to-sales ratio in 2010.
Manufacturers have an expectation that employment in the sector will increase by 1.5%, while labor and benefits costs are expected to increase an average of 1.4% in 2010. Manufacturing purchasers are predicting strength in exports and imports in 2010. They also expect the U.S. dollar to weaken on average against the currencies of major trading partners.
The panel also predicts the prices they pay will increase 0.2% during the first four months of 2010, and will increase an additional 2.4% during the balance of 2010, with an overall increase of 2.6% for 2010. Respondents' major concerns are: weak economy; credit crisis; taxes; interest rates; and high energy costs. Survey respondents expect to realize supply chain improvements through supplier consolidation; new or improved enterprise technology and system utilization; improved inventory/asset management; lean manufacturing; and cost reduction.
For more information, visit www.ism.ws.