ISM Reports Economic Growth To Continue In 2020
Economic growth in the United States will continue in 2020, say the nation’s purchasing and supply management executives in the December 2019 Semiannual Economic Forecast. Expectations are for a continuation of the growth that began in mid-2009, as indicated in the monthly ISM Report On Business. The manufacturing sector is optimistic about growth in 2020, with revenues expected to increase in all 18 manufacturing industries, and the non-manufacturing sector also indicates that 17 of its industries will see higher revenues. Capital expenditures are expected to decrease by 2.1 percent in the manufacturing sector (after 6.4-percent growth in 2019) and increase by 3.4 percent in the non-manufacturing sector. Manufacturing expects that its employment base will grow slightly, by 0.1 percent, while the outlook for the next 12 months is predominately growth oriented.
These projections are part of the forecast issued by the Business Survey Committee of Institute for Supply Management (ISM). The forecast was released today by Timothy R. Fiore, CPSM, C.P.M, Chair of the ISM Manufacturing Business Survey Committee, and by Anthony S. Nieves, CPSM, C.P.M., A.P.P, CFPM, Chair of the ISM Non-Manufacturing Business Survey Committee.
Expectations for 2020 are positive, as 58 percent of survey respondents expect revenues to be greater in 2020 than in 2019. The panel of purchasing and supply executives expects a 4.8-percent net increase in overall revenues for 2020, compared to a 1.9-percent increase predicted for 2019 over 2018 revenues. All 18 manufacturing industries expect revenue improvement in 2020 over 2019, listed in order: Fabricated Metal Products; Food, Beverage & Tobacco Products; Apparel, Leather & Allied Products; Paper Products; Furniture & Related Products; Chemical Products; Wood Products; Computer & Electronic Products; Miscellaneous Manufacturing; Machinery; Transportation Equipment; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Primary Metals; Printing & Related Support Activities; Textile Mills; Petroleum & Coal Products; and Nonmetallic Mineral Products.
“Manufacturing purchasing and supply executives expect to see growth in 2020. They are optimistic about their overall business prospects for the first half of 2020, with business continuing to expand through the second half of 2020. Manufacturing experienced eight consecutive months of growth from December 2018 through July 2019. However, manufacturing contracted during the period from August 2019 through November 2019. This resulted in an average PMI of 51.8 percent, as compared to 59.2 percent for the 12 months ending November 2018, as reported in the monthly Manufacturing ISM Report On Business. Respondents expect raw materials pricing pressures in 2020 to increase and expect profit margins to improve in 2020 over 2019. Manufacturers are also predicting growth in both exports and imports in 2020,” says Fiore.
In the manufacturing sector, respondents report operating at 83.7 percent of their normal capacity, down 0.5 percentage point from the 84.2 percent reported in May 2019. Purchasing and supply executives predict that capital expenditures will decrease by 2.1 percent in 2020 over 2019, compared to the 6.4-percent increase reported for 2019 over 2018. Manufacturers expect employment in the sector to grow by 0.1 percent in 2020 relative to December 2019 levels, while labor and benefit costs are expected to increase an average of 0.7 percent in 2020. Respondents also expect the U.S. dollar to strengthen against all seven currencies of major trading partners in 2020, as was the case in 2019.
The panel predicts the prices paid for raw materials will increase by 0.4 percent during the first five months of 2020, with an overall increase of 1.1 percent for 2020. This compares to a reported 0.7 percent increase in raw materials prices for 2019 compared with 2018.
Fifty percent of non-manufacturing supply management executives expect their 2020 revenues to be greater than in 2019. They expect a 3.4-percent net increase in overall revenues for 2020 compared to a 4.4-percent increase reported for 2019 over 2018 revenues. The 17 industries expecting increases in revenues in 2020 — listed in order of percentage increase — are: Management of Companies & Support Services; Mining; Professional, Scientific & Technical Services; Wholesale Trade; Arts, Entertainment & Recreation; Other Services; Health Care & Social Assistance; Educational Services; Utilities; Information; Accommodation & Food Services; Retail Trade; Finance & Insurance; Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; and Public Administration.
“Non-manufacturing supply managers report operating at 86 percent of their normal capacity, lower than the 89 percent reported in May 2019. They are optimistic about continued growth in the first half of 2020 compared to the second half of 2019, with a projected decrease in growth rate for capital reinvestment. They forecast that their capacity to produce products and provide services will rise by 3.6 percent during 2020, and capital expenditures will increase by 1.3 percent from 2019 levels. Non-manufacturers also predict their employment will increase by 1.2 percent during 2020,” says Nieves.
Respondents in non-manufacturing industries expect the prices they pay for materials and services to increase by 1.9 percent during 2020. They also forecast that their overall labor and benefit costs will increase 1.8 percent. Profit margins are reported to have decreased in the second and third quarters of 2019, and respondents expect them to increase between now and May 2020.