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ISM’s semiannual economic forecast predicts U.S. manufacturers will record a healthy net increase in revenues totaling 6.9 percent this year, reversing a 1.3 percent decline during pandemic-plagued 2020. Fifteen of 18 industry sectors tracked by ISM are expected to record increases, including the computer and electronic products segment.
U.S. manufacturers have recorded seven consecutive months of growth beginning last June, ISM reported. “Manufacturing’s purchasing and supply executives expect to see strong growth in 2021,” said Timothy Fiore, chairman of the ISM Manufacturing Business Survey Committee.
“They are optimistic about overall business prospects for the first half of 2021, with business continuing to expand through the second half and at higher rates.”
There are several 2020 headwinds that manufacturers will face for at least the first half of the year. Supply shortages are cropping up in several industry sectors, including high-tech; Covid-19 continues to constrain employment levels; and global logistics capacity is tight, particularly for ocean cargo.
Nevertheless, the ISM survey found that 59 percent of purchasing and supply executives polled expect revenue growth in 2021.
As net revenues increase, so too do projections for capital spending: ISM predicts a 2.4 percent jump in capex investments over last year. The forecast mirrors other key sectors such as semiconductor manufacturing, where infrastructure investments jumped 34 percent in 2020.

Source: ISM
Meanwhile, overall U.S. manufacturing capacity utilization jumped nearly 10 percentage points on an annual basis to 85.7 percent, reflecting sustained demand for products ranging from electronics to paper products.
The U.S. manufacturing surge is also expected to generate badly needed jobs, with employment expected to grow 2.5 percent this year on an annual basis. Labor shortages will push up wages and benefits by an average of 2.7 percent, ISM predicts.
As U.S. manufacturing rebounds, supply chain issues persist, especially at west coast port facilities clogged by a surge of end-of-year cargo volumes. “The pandemic also impacted the availability of critical workers throughout the supply chain, including those working at the ports, railroads, trucking companies, warehouses and retail locations,” the Pacific Merchant Shipping Association warned earlier this month.

Source: Freightos
“Though there are signs that the empty container shortage may be starting to ease, it is unlikely to disappear until demand eases," according to freight expert Freightos. "A recent outbreak of Covid-19 infections among LA/Long Beach dock workers may even make the situation worse at the already-overwhelmed port,” the firm reported.
A recent survey of small importers on the Freightos.com marketplace found that 77 percent of these businesses experienced supply chain difficulties due to the pandemic over the last six months. In order to contend with the ramifications of higher costs and thinner inventories, 34 percent reported that they increased product prices, while another 26 percent said they had to reduce their margins.
U.S. manufacturers were nevertheless upbeat about export prospects in 2021, with more than half expecting increased orders, including a small percentage anticipating “substantial” increases in demand during the first half of 2021.
Those manufacturing gains are expected to persist, with 49 percent of executives polled by ISM anticipating second-half gains to exceed the first six months of this year.
“The manufacturing sector is currently expanding, and the forecast indicates that it may continue in the first half of 2021 and expand at a slightly higher rate in the second half of 2021,” ISM concluded.
The institute’s manufacturing forecast is based on survey data gathered in December 2020.
In summary, the ISM manufacturing forecast found:
- Operating rate is currently at 85.7 percent.
- Production capacity increased by 0.5 percent in 2020.
- Production capacity is expected to increase by 5.3 percent in 2021.
- Capital expenditures decreased 2.4 percent in 2020.
- Capital expenditures are expected to increase 2.4 percent in 2021.
- Prices paid increased 1.5 percent in 2020.
- Overall, 2021 prices paid are expected to increase 2.5 percent.
- Labor and benefit costs are expected to increase 2.7 percent in 2021.
- Manufacturing employment is predicted to increase 2.5 percent in 2021.
- U.S. exports growth expected in 2021.
- U.S. imports growth expected in 2021.
- Manufacturing revenues decreased 1.3 percent in 2020.
- Manufacturing revenues are expected to increase 6.9 percent in 2021.
- The U.S. dollar is expected to weaken versus six of the seven major trading partner currencies in 2021.
- Manufacturing supply managers have an optimistic outlook, with 63 percent of respondents predicting 2021 will be better than 2020.