ISM: Economic Growth To Continue In 2018
Economic growth in the United States will continue in 2018, say the nation’s purchasing and supply management executives.
That’s the finding of the December 2017 Semiannual Economic Forecast by the Institute for Supply Chain Management (ISM).
Expectations are for a continuation of the economic recovery that began in mid-2009, according to the monthly ISM Report On Business.
The manufacturing sector is optimistic about growth in 2018, with revenues expected to increase in 16 manufacturing industries, while the non-manufacturing sector indicates that 17 of its industries will see higher revenues.
Capital expenditures, a major driver in the U.S. economy, are expected to increase by 2.7% in the manufacturing sector and by 3.8% in the non-manufacturing sector.
Manufacturing expects that its employment base will grow by 1.2%, while non-manufacturing expects employment growth of 1.5%.
These projections are part of the forecast issued by the Business Survey Committee of the ISM.
In the manufacturing sector, expectations for 2018 are positive, with 70% of survey respondents expect revenues to be greater in 2018 than in 2017.
The panel of purchasing and supply executives expects a 5.1% net increase in overall revenues for 2018, compared to a 4.6% increase predicted for 2017 over 2016 revenues.
The 16 manufacturing industries expecting revenue improvement in 2018 over 2017 — listed in order — are: Fabricated Metal Products; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Machinery; Miscellaneous Manufacturing; Computer & Electronic Products; Transportation Equipment; Plastics & Rubber Products; Primary Metals; Paper Products; Textile Mills; Chemical Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Printing & Related Support Activities; and Petroleum & Coal Products.
In 2017, manufacturing experienced 11 straight months of growth from January through November, resulting in an average PMI of 57.4, compared to 51.5 for 2016.
Respondents expect raw materials pricing pressures in 2018 to increase, and expect their profit margins will improve in 2018 over 2017.
Manufacturers are also predicting growth in both exports and imports in 2018.
Manufacturing sector respondents report operating at 85.8% of their normal capacity, up from the 82.5% reported in May 2017.
They predict that capital expenditures will increase by 2.7% in 2018 over 2017, compared to the 8.7% increase reported for 2017 over 2016.
Manufacturers expect employment in the sector to grow by 2.3% in 2017 from December 2016 levels, while labor and benefit costs are expected to increase an average of 2.1% in 2018.
Respondents also expect the U.S. dollar to strengthen against all seven currencies of major trading partners in 2018, as was the case in 2017.
The panel predicts that prices paid for raw materials will increase by 1.3% during the first four months of 2018, and will increase an additional 0.5% during the balance of the year, with an overall increase of 1.8% for 2018.
This compares to a reported 2.1% increase in raw materials prices for 2017 compared with 2016.
Among non-manufacturing supply management executives, 59% expect their 2018 revenues to be greater than in 2017.
They expect a 6% net increase in overall revenues for 2018 compared to a 5.7% increase reported for 2017 over 2016 revenues.
The 17 non-manufacturing industries expecting revenue improvement in 2018 over 2017, listed in order, are: Information; Professional, Scientific & Technical Services; Construction; Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Retail Trade; Real Estate, Rental & Leasing; Transportation & Warehousing; Wholesale Trade; Other Services; Health Care & Social Assistance; Arts, Entertainment & Recreation; Finance & Insurance; Educational Services; Accommodation & Food Services; Public Administration; and Mining.
Non-manufacturing supply managers report operating at 91.9% of capacity, higher than the 86.9% reported in May 2017.
They are optimistic about continued growth in the first half of 2018 compared to the second half of 2017, even though they project a decrease in growth rate for capital reinvestment.
They forecast capacity will rise by 3.4% during 2018, capital expenditures to increase by 3.8% from 2017 levels, and employment to increase by 1.5% during 2018.
Respondents in non-manufacturing industries expect prices for materials and services to increase by 2.2% during 2018, and overall labor and benefit costs to increase 2.6% in 2018.
Profit margins decreased in the second and third quarters of 2017, and respondents expect them to increase between now and May 2018.
The full text version of the report is posted on ISM’s Home Page at www.ismrob.org