Subscribe to our free, weekly email newsletter!


ISM semiannual report points to economic growth for remainder of 2013

By Jeff Berman, Group News Editor
April 30, 2013

In its spring 2013 Semiannual Economic Forecast, the Institute for Supply Management (ISM) is pointing to economic growth for the rest of the year in the manufacturing and non-manufacturing sectors.

The report is based on feedback from U.S.-based purchasing and supply chain executives, manufacturing and non-manufacturing sectors.

For manufacturing, the report said manufacturing revenue is expected to increase 4.8 percent through the end of 2013, with capital investment expected to grow at a 9.1 percent clip, and capacity utilization at 80.2 percent. 

Other manufacturing-related metrics cited in the report included: production capacity being expected to increase 6.7 percent in 2013, just under December’s 6.8 percent prediction; prices expected to increase 2.3 percent for 2013, with 55 percent of ISM member respondents noting they expected a 5.6 percent uptick in rates; and employment seeing a 0.9 percent gain.

Looking at manufacturing revenues, Brad Holcomb, chair of the ISM Manufacturing Survey Business Committee, said in an interview that the expected 4.8 percent gain is up from December’s 4.6 percent and represents a meaningful increase from 2012’s 4.0 percent.

“The only industry reporting a slight expected decline is transportation, which includes aircraft, and is undoubtedly impacted by reduced government defense spending, but on the whole it is a positive number, which represents growth.

For non-manufacturing, the ISM report expects revenue to increase 3.5 percent, with capital investment expected to rise 3.6 percent. Non-manufacturing capacity utilization is expected to be at 84.7 percent.

Non-manufacturing production capacity is expected to increase by 2.3 percent, and prices are expected to rise 2.4 percent, and employment is expected to go up1.3 percent.

“For non-manufacturing revenues, we see it being down slightly from 4.3 percent at the end of 2012 to 3.5 percent now,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee. “It has to do with confidence, and we also see it with capital reinvestment, too, and also correlate to the flat rate we are seeing for employment. All of these things together speak to the uncertainty still on the horizon.”

But Nieves cautioned it is not all gloom and doom for non-manufacturing, with plenty of positives in the mix, including strong construction sector revenue growth, which is in sync with what is happening on the manufacturing side as it relates to things like housing starts and other facets of the economy.

With capital investments pegged at 9.1 percent and 3.6 percent, respectively, for manufacturing and non-manufacturing, Holcomb and Nieves made their cases for what is driving these figures.

For manufacturing, Holcomb pointed to how it checked in ahead of December’s 7.6 percent estimate, adding that it “speaks to the optimism of manufacturing” and how ISM respondents feel about their company’s bookings and new orders in the coming months.

“I am actually quite surprised at how strong that number is,” explained Holcomb. “It is pretty broad-based and is also a flexible number as procurement officers keep a close eye on company purse strings.”

For non-manufacturing capital investments, Nieves pointed out how in 2012 they exceeded what was predicted for 2012, with the confidence carried over into early 2013 which has since followed into 2013 as companies maintain a conservative approach to capital reinvestment.

Capacity utilization at 80.2 percent and 84.7 percent, respectively, for manufacturing and non-manufacturing are in fairly decent ranges, according to Holcomb and Nieves.

“We would consider full manufacturing operating capacity at 85 percent so there is plenty of upside capacity at the moment,” said Holcomb. “It is a good strong number.”

If the figure rose in conjunction with increased capital expenditures, Holcomb said he would expect capacity to rise, with these figures sort of serving as moving targets.

Nieves said that the 84.7 rate for non-manufacturing reflects how the sector largely continues to do well.

“We continually hear the cliché of ‘doing more with less,’ and we saw a bit of a pop in employment in the more labor-intensive non-manufacturing industries, and now there is a little fall off in things like new orders in recent months, so this speaks to that,” he said. “It is still a very strong operating rate. I like to say if you look at the revenues being off a little bit and operating where it is, it means there is more margin in it.”

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Information abounds about the growing trend of electric lift trucks and the advantages and disadvantages of the electric solution. Amid all of the information from so many sources, what's the truth about electric lift trucks? This complimentary white paper breaks through the clutter to review why electric lift trucks are gaining in popularity and also to review their challenges, as well as their economic and environmental benefits.

Three weeks after initiating a coordinated series of slowdowns that have mired the major West Coast ports of Tacoma, Seattle, Oakland, Los Angeles and Long Beach, the ILWU has pushed away from the bargaining table.

DHL has released the third edition of its Global Connectedness Index (GCI), a detailed analysis of the state of globalization around the world.

The truck driver shortage is worsening, threatening the trucking industry’s ability to serve the nation’s supply chains. The shortage will almost certainly cause fleets’ costs to increase and shippers’ rate to continue to rise.

The Agriculture Transportation Coalition has asked the Administration to bring in a federal mediator to help resolve the negotiations, and if a strike or lockout occurs, the AgTC advocates the rarely-invoked Taft-Hartley Act.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA