While growth is expected to remain in the cards, for the manufacturing and services sectors, over the balance of 2023, it is no longer set to expand at the same rates as were previously indicated, according to the “Spring 2023 Semiannual Economic Forecast,” which was issued this week by the Institute for Supply Management (ISM).
Data for this report is based on feedback from U.S.-based purchasing and supply chain executives in manufacturing and non-manufacturing sectors.
For manufacturing, ISM is estimating a 1.7% revenue gain for all of 2023, 3.8% below its 5.5% estimate made in its predecessor report in December, and 7.6% below 2022’s annual 9.3% increase. The report said 40% of manufacturing respondents indicated that 2023 revenues will see an average annual increase of 11.6%, with 20% indicating revenues will see an average annual decrease of 14.6%, and 40% said revenues will be flat. The report found that 10 of the 18 surveyed manufacturing sectors expect 2023 revenue gains.
Manufacturing capital expenditures (capex) are expected to eke out a 0.4% increase in 2023, below December’s 2.6% estimate. The report observed that 24% of respondents are, on average, predicting increased 2023 capex, with 20% saying it would decrease, on average, by 26.7%, with 56% expecting no change in capex spending. The report said that eight manufacturing sectors are expected capex increases in 2023.
Manufacturing capacity utilization, or operating rate, came in at 82%, below December’s 88.5 reading. Raw materials prices paid, which were estimated to come in up 2.5%, through the first four months of 2023, in the December report, came in close to that, increasing 2.3% in the May edition. Manufacturing employment is expected to see a 0.5% gain in 2023, below December’s 3.9% estimate.
“With 10 manufacturing sector industries expecting revenue growth in 2023 and 11 industries expecting employment growth in 2023, panelists forecast that recovery will continue the rest of the year, albeit somewhat softer than originally expected,” said Tim Fiore, Chair of the ISM Manufacturing Business Survey Committee, in the report. “Sentiment in each sector was generally consistent with industry performance reports in the April 2023 Manufacturing ISM Report On Business, as well as the fall Semiannual Economic Forecast conducted in December.”
Services outlook: ISM member panelists are calling for 2023 services-based economy revenues to head up 2.7%, below December’s 3.1% estimate. The report found that 38% of respondents indicated that 2023 revenues will increase, on average by 10.2% annually, with 11% expecting revenues to decrease by 11.1% on average, with 51% indicating there will be no change. ISM said that 14 Services sectors expect 2023 revenue increases.
Services production capacity, or the capacity to produce products or provide services in this sector, is expected to rise 0.4% in 2023, below December’s 2.6% estimate. And it added that Services organizations are operating, on average, at 91% of normal capacity, 1.1% above the December reading.
On the capex side, Services is pegged to see a 2.7% net increase, down from December’s 3.9% reading. And employment is estimated to be up 0.7% down from December’s 3.9% reading. Looking at pricing, Services pricing is predicted to be up 4.3% in 2023, topping December’s 2.0% estimate.
“The services sector will continue to grow for the rest of 2023. Services companies are currently operating at 91 percent of normal capacity,” said Tony Nieves, Chair of the ISM’s Business Survey Committee, in the report. “Supply managers indicate that prices are expected to increase 4.3 percent over the year, reflecting increasing inflation. Employment is projected to increase 0.7 percent. Fourteen industries forecast increased revenues, down from the 14 industries that predicted increases in December 2022.”