U.S. purchasing and supply chain executives have tempered their growth expectations for the rest of 2016, but about half of those surveyed expect their revenue will increase by as much as 10.5 percent, according to the Institute for Supply Management.
Overall, manufacturing supply chain executives expect 2.8 percent revenue growth for 2016, according to the ISM’s Spring 2016 Semiannual Economic Forecast. This current prediction is 1.3 percentage points below the December 2015 forecast of 4.1 percent revenue growth for 2016, but is 1.4 percent above the actual revenue growth reported for all of 2015.
Fifty percent of respondents from the panel of manufacturing supply management executives predict their revenues will be 10.5 percent greater in 2016 compared to 2015, 18 percent expect a 14.2 percent decline, and 32 percent foresee no change in revenue.
Manufacturing is positioned to grow revenues while containing costs through the remainder of the year, according to Brad Holcomb, chair of the ISM’s Business Survey Committee. Manufacturers predict their operating capacity will be at 81.7 percent; capital expenditures will increase by 1 percent; raw materials prices will go up a mere 0.6 percent and employment is expected to remain at current levels. “With 14 of the 18 industries within the manufacturing sector predicting revenue growth in 2016 when compared to 2015, U.S. manufacturing continues to move in a positive direction,” said Holcomb.
Manufacturers were also asked a couple of special questions regarding the impact of the U.S. dollar on their businesses. In response to the first question relating to the impact on profits due to the strength of the US dollar, the panel indicated the following:
- Negative impact on organization’s profits: (32.3%)
- Negligible impact on organization’s profits: (35.9%)
- Positive impact on organization’s profits: (16.1%)
- Unsure: (15.7%)
In response to the second question relating to the impact on profits due to the depressed prices of oil and related commodities, the panel indicated the following:
- Negative impact on organization’s profits: (21.4%)
- Negligible impact on organization’s profits: (20.5%)
- Positive impact on organization’s profits: (46.4%)
- Unsure: (11.6%)
In response to the third question relating to the combined impact of the strength of the US dollar and the depressed prices of oil and related commodities, the panel indicated the following:
- Negative impact on organization’s profits: (27.6%)
- Negligible impact on organization’s profits: (22.2%)
- Positive impact on organization’s profits: (33.8%)
- Unsure: (16.4%)
Some highlights from the report include:
Production capacity in manufacturing is expected to increase 3.0 percent in 2016. This increase is greater than the 2.8 percent increase predicted in December 2015 for 2016, and also greater than the 1.9 percent increase reported in December 2015 for all of 2015. This reflects the continuing strength in the sector as 38 percent of respondents expect an average capacity increase of 10.9 percent, 7 percent expect decreases averaging 15.6 percent, and 55 percent expect no change.
Survey respondents expect a 1 percent increase in capital expenditures in 2016. This is the same increase as the panel predicted in the December 2015 forecast for 2016. Currently, 30 percent of respondents predict increased capital expenditures in 2016, with an average increase of 24.3 percent, and the 21 percent who said their capital spending would decrease an average of 29.2 percent. Forty-nine percent say they will spend the same in 2016 as they did in 2015
In the December 2015 forecast, respondents predicted an increase of 0.1 percent in prices paid during the first four months of 2016; and they now report prices have decreased by 1.1 percent for the same period. The 21 percent who say their prices are higher now than at the end of 2015 report an average increase of 4.4 percent, while the 37 percent who report lower prices report an average decrease of 5.5 percent. The remaining 42 percent indicate no change for the period.
ISM’s Manufacturing Business Survey respondents forecast that manufacturing employment will remain at the current level on average through the end of 2016.Thirty-two percent of respondents expect employment to be 5.9 percent higher, while 20 percent of respondents predict employment to be lower by 9.9 percent. The remaining 48 percent of respondents expect their employment levels to be unchanged for the remainder of 2016.