In spite of a slow start to 2015, the nation’s purchasing and supply executives expect economic growth to continue in the United States throughout the remainder of the year. A work slowdown at key U.S. seaports; low oil prices; a strong dollar and a lingering winter all contributed to a sluggish start to 2015, according to the Institute for Supply Management’s Semiannual Economic Forecast. But 55 percent of manufacturing executives surveyed expect their revenue to increase throughout 2015.
The ISM typically polls members on production levels, revenue expectations and other key manufacturing indices. This cycle, the ISM asked two special questions regarding the impact of the work slowdown at the West Coast seaports of Los Angeles and Long Beach, CA; and the impact of low oil prices. Both topics remain on manufacturers' list of concerns.
Fifty-five percent of respondents from the panel of manufacturing supply management executives predict their revenues will be 9 percent greater in 2015 compared to 2014, 16 percent expect an 8.9 percent decline, and 29 percent foresee no change in revenue. This yields an overall average expectation of 3.5 percent revenue growth among manufacturers in 2015, which is a meaningful decrease of 2.1 percentage points from December 2014 when the panel predicted a 5.6 percent increase in 2015 revenues. With operating capacity at 79.5 percent, an expected capital expenditure increase of 3.1 percent, prices paid for raw materials expected to decrease a 0.9 percentage point for all of 2015 compared to 2014, and employment expected to grow 0.7 percent for the balance of 2015, manufacturing is positioned to grow revenues while containing costs through the remainder of the year. "With 14 of the 18 industries within the manufacturing sector predicting revenue growth in 2015 when compared to 2014, U.S. manufacturing continues to move in a positive direction,"said Bradley J. Holcomb, chair of the Institute for Supply Management Manufacturing Business Survey Committee.
The 14 industries reporting expectations of growth in revenue for 2015 — listed in order — are: Nonmetallic Mineral Products; Paper Products; Primary Metals; Furniture & Related Products; Machinery; Textile Mills; Food, Beverage & Tobacco Products; Fabricated Metal Products; Plastics & Rubber Products; Chemical Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Computer & Electronic Products; and Transportation Equipment.
With respect to the West Coast port slowdown in the early months of 2015, the ISM asked the manufacturing panel to comment on whether their particular businesses were impacted, and if so, whether the impact was short term (impact cleared within a few months) or long term (having a lasting effect on most of the year). Of the total responses compiled, 38.7 percent said their businesses were not impacted, 47.7 percent indicated a short term impact, 9 percent indicated a long term impact, and 4.5 percent were unsure.
When asked about the net annual impact of the fluctuating price of oil and related commodities, 14.5 percent of respondents indicated a negative net impact to their businesses, 41 percent indicated a positive net impact, 33.5 percent indicated a negligible impact, and 11 percent of respondents were unsure.
Overview of Manufacturing Trends:
- Operating rate is currently 79.5 percent of normal capacity.
- Production capacity is expected to increase 3.4 percent in 2015.
- Capital expenditures are expected to increase 3.1 percent in 2015.
- Prices paid decreased 1.9 percent through the end of April 2015.
- Prices are expected to decrease a total of 0.9 percent for all of 2015, indicating an expected increase in prices of 1.0 percent for the remainder of the year.
- Manufacturing employment is expected to increase 0.7 percent during the remainder of 2015.
- Manufacturing revenues are expected to increase 3.5 percent in 2015.
- Overall, manufacturing is expected to maintain a positive growth trend in 2015
The full report is available at ISM.