Manufacturing Growth Marginal in 2008
Revenue to Increase 1%;
Capital Investment to Increase 1%;
Capacity Utilization at 78.6%
Non-Manufacturing Growth Sustainable in 2008
Revenue to Increase 2.7%;
Capital Investment to Decrease 2.7%;
Capacity Utilization at 85.9%
TEMPE, Ariz.--(Business Wire)--
Economic growth in the United States is sustainable throughout the
remainder of 2008, say the nation's purchasing and supply executives
in their spring 2008 Semiannual Economic Forecast. Expectations for
the remainder of 2008 are encouraging in both the manufacturing and
non-manufacturing sectors.
These projections are part of the forecast issued by the Business
Survey Committee of the Institute for Supply Management(TM) (ISM). The
forecast was presented today by Norbert J. Ore, C.P.M., chair of the
ISM Manufacturing Business Survey Committee, and group director,
strategic sourcing and procurement, Georgia-Pacific LLC; and by
Anthony S. Nieves, C.P.M., CFPM, chair of the ISM Non-Manufacturing
Business Survey Committee, and senior vice president -- supply
management, Hilton Hotels Corporation.
Manufacturing Summary
While 42 percent of respondents predict revenues to be 9.2 percent
greater in 2008 than in 2007, the overall expected revenue increase is
only 1 percent for manufacturing as 31 percent expect a 9.3 percent
decline, and 27 percent expect no change. This represents a
significant decline in expectations from December 2007 when the panel
of supply management executives predicted a 6.8 percent increase in
2008 revenues. With operating capacity at 78.6 percent, expected
capital investment growth at 1 percent and prices expected to increase
8.5 percent during 2008, manufacturers will need to focus on cost
cutting to offset lower revenue growth and higher input prices.
"On average, respondents are concerned about their organizations'
prospects for 2008," said Ore.
The manufacturing industries expecting the greatest revenue
increases in 2008 -- listed in order -- are: Electrical Equipment,
Appliances & Components; Primary Metals; Miscellaneous
Manufacturing(a); Machinery; Food, Beverage & Tobacco Products; Paper
Products; Plastics & Rubber Products; and Chemical Products.
Non-Manufacturing Summary
Forty-three percent of non-manufacturing purchasing and supply
executives expect their 2008 revenues to be greater than in 2007.
Overall, respondents currently expect a 2.7 percent net increase in
overall revenues, greater than the 2 percent increase that was
forecast in December 2007.
Non-manufacturing industries expecting increases in revenue at or
above the average of 2.7 percent in 2008 are: Construction;
Professional, Scientific & Technical Services; Wholesale Trade;
Agriculture, Forestry, Fishing & Hunting; Other Services(b); Retail
Trade; and Utilities.
OPERATING RATE
Manufacturing
Purchasing and supply managers report that their companies are
currently operating at 78.6 percent of normal capacity, representing a
decline from the 82.9 percent reported in December 2007 and the 82.8
percent reported in April 2007; and the lowest operating rate reported
since December 2001 when the reported manufacturing operating rate was
77.5 percent. This is consistent with the trend of slower growth in
manufacturing as reported in the monthly Manufacturing ISM Report On
Business(R). The following industries are operating at capacity levels
above the average capacity of 78.6 percent: Apparel, Leather & Allied
Products; Paper Products; Electrical Equipment, Appliances &
Components; Primary Metals; Plastics & Rubber Products; Computer &
Electronic Products; Miscellaneous Manufacturing(a); Food, Beverage &
Tobacco Products; Petroleum & Coal Products; Textile Mills; and
Printing & Related Support Activities.
Non-Manufacturing
Non-manufacturing purchasing and supply executives report that
their organizations are currently operating at 85.9 percent of normal
capacity. This is lower than the 86.4 percent reported in December
2007, but higher than the 84.4 percent reported in April 2007. The
following section of this forecast indicates that non-manufacturing
industries are continuing to add capacity in 2008. The following
industries are operating at capacity levels above the average rate of
85.9 percent: Educational Services; Utilities; Accommodation & Food
Services; Public Administration; Health Care & Social Assistance;
Other Services(b); and Transportation & Warehousing.
-0-
*T
Operating Rate
----------------------------------------------------------------------
Manufacturing Non-Manufacturing
----------------------------------------------------------------------
April Dec April April Dec April
2007 2007 2008 2007 2007 2008
----------------------------------------------------------------------
90%+ 43% 41% 33% 47% 56% 52%
----------------------------------------------------------------------
50%-89% 53% 54% 60% 52% 38% 46%
----------------------------------------------------------------------
Below 50% 4% 5% 7% 1% 6% 2%
----------------------------------------------------------------------
Est. Overall Average 82.8% 82.9% 78.6% 84.4% 86.4% 85.9%
----------------------------------------------------------------------
*T
PRODUCTION CAPACITY - April 2008
Manufacturing
Production capacity in manufacturing is expected to increase 2.5
percent in 2008. This is significantly less than the 11.3 percent
predicted in December 2007 and the 8.3 percent reported in December
for 2007. This reflects the current downturn in the sector as 31
percent reported an average capacity increase of 13.1 percent, 12
percent reported decreases averaging 13.1 percent, and 57 percent
reported no change. The industries reporting expected production
capacity increases at or above 2.5 percent are: Food, Beverage &
Tobacco Products; Furniture & Related Products; Chemical Products;
Electrical Equipment, Appliances & Components; Miscellaneous
Manufacturing(a); and Fabricated Metal Products.
-0-
*T
Manufacturing Production Capacity
----------------------------------------------------------------------
For 2007 For 2008 For 2008
----------------------------------------------------------------------
Reported Magnitude Predicted Magnitude Predicted Magnitude
Dec 2007 of Change Dec 2007 of Change April 2008 of Change
----------------------------------------------------------------------
Higher 43% + 25.1% 53% + 23.7% 31% + 13.1%
----------------------------------------------------------------------
Same 41% NA 36% NA 57% NA
----------------------------------------------------------------------
Lower 16% - 16.0% 11% - 11.5% 12% - 13.1 %
----------------------------------------------------------------------
Net
Average + 8.3% + 11.3% + 2.5%
----------------------------------------------------------------------
*T
Non-Manufacturing
The capacity to produce products or provide services in the
non-manufacturing sector is expected to increase 3.9 percent during
2008. This compares to an increase of 1.5 percent reported for 2007
and a prediction in December 2007 of 2.3 percent for 2008. For 2008,
34 percent of non-manufacturing respondents expect their capacity to
increase by an average of 16.1 percent, and 7 percent of the
respondents foresee their capacity decreasing by an average of 19.6
percent. Fifty-nine percent expect no change in their capacity. The
industries expecting to add more than the average 3.9 percent to their
production capacity are: Management of Companies & Support Services;
Mining; Construction; Educational Services; Professional, Scientific &
Technical Services; and Real Estate, Rental & Leasing.
-0-
*T
Non-Manufacturing Production or Provision Capacity
----------------------------------------------------------------------
For 2007 For 2008 For 2008
----------------------------------------------------------------------
Reported Magnitude Predicted Magnitude Predicted Magnitude
Dec 2007 of Change Dec 2007 of Change April 2008 of Change
----------------------------------------------------------------------
Higher 32% + 9.2% 36% + 9.6% 34% + 16.1 %
----------------------------------------------------------------------
Same 59% NA 56% NA 59% NA
----------------------------------------------------------------------
Lower 9% - 17.1% 8% - 13.3% 7% - 19.6%
----------------------------------------------------------------------
Net
Average + 1.5% + 2.3% + 3.9%
----------------------------------------------------------------------
*T
PREDICTED CAPITAL EXPENDITURES -- 2008 vs. 2007
Manufacturing
Survey respondents expect a 1 percent increase in capital
expenditures in 2008. This is slightly higher than the December 2007
forecast when members predicted only a 0.7 percent increase for 2008.
Currently, 29 percent of respondents predict increased capital
expenditures in 2008 with an average increase of 37.4 percent, while
the 30 percent who said their capital spending would be reduced report
an average decrease of 32.9 percent. Forty-one percent say they will
spend the same in 2008 as they did in 2007. Industries predicting an
increase above 1 percent are: Primary Metals; Paper Products; Printing
& Related Support Activities; Transportation Equipment; Miscellaneous
Manufacturing(a); Machinery; and Petroleum & Coal Products.
Non-Manufacturing
Non-manufacturing purchasing and supply executives are expecting
to decrease their level of capital expenditures 2.7 percent in 2008
compared to 2007. The 32 percent of members expecting to spend more
predict an average increase of 18.9 percent. An additional 27 percent
anticipate a decrease averaging 32.1 percent. Forty-one percent of the
respondents expect to spend the same on capital expenditures in 2008
as in 2007. Industries expecting an increase in capital expenditures
in 2008 from 2007 are: Management of Companies & Support Services;
Mining; Real Estate, Rental & Leasing; and Utilities.
-0-
*T
Predicted Capital Expenditures 2008 vs. 2007
----------------------------------------------------------------------
Manufacturing Non-Manufacturing
----------------------------------------------------------------------
Predicted Predicted Magnitude Predicted Predicted Magnitude
Dec 2007 Apr 2008 of Change Dec 2007 Apr 2008 of Change
----------------------------------------------------------------------
Higher 34% 29% + 37.4% 43% 32% + 18.9%
----------------------------------------------------------------------
Same 39% 41% NA 30% 41% NA
----------------------------------------------------------------------
Lower 27% 30% - 32.9% 27% 27% - 32.1%
----------------------------------------------------------------------
Net
Average + 0.7% + 1.0% - 6.3% - 2.7%
----------------------------------------------------------------------
*T
PRICES -- Changes Between End of 2007 and April 2008
Manufacturing
In the December 2007 forecast, respondents forecasted an increase
of 3.3 percent in prices paid during the first four months of 2008;
however, they now report prices have increased 6 percent for the
period. The 83 percent who say their prices are higher now than at the
end of 2007 report an average increase of 7.9 percent, while the 7
percent who report lower prices report an average decrease of 7.4
percent. The remaining 10 percent indicate no change for the period.
Industries reporting increases at or above 3 percent in prices paid
for the first part of 2008 are: Food, Beverage & Tobacco Products;
Fabricated Metal Products; Wood Products; Machinery; Transportation
Equipment; Chemical Products; Nonmetallic Mineral Products; Textile
Mills; Electrical Equipment, Appliances & Components; Miscellaneous
Manufacturing(a); and Printing & Related Support Activities.
Non-Manufacturing
Non-Manufacturing respondents report that their purchases in the
first four months of this year cost an average of 5.7 percent more
than they cost at the end of 2007. This is 2.1 percentage points above
the 3.6 percent predicted in December 2007 for 2008. Seventy-five
percent of the non-manufacturing respondents report the prices they
paid increased an average of 8.1 percent in the first part of 2008.
Six percent report price decreases averaging 5.9 percent. The
remaining 19 percent indicate no change in prices in the first four
months of 2008. Industries reporting a greater-than-average increase
in prices they paid in the first part of 2008 are: Wholesale Trade;
Accommodation & Food Services; Agriculture, Forestry, Fishing &
Hunting; Construction; Arts, Entertainment & Recreation; Public
Administration; and Mining.
-0-
*T
Prices - Changes Between End of 2007 and April 2008
----------------------------------------------------------------------
Manufacturing Non-Manufacturing
----------------------------------------------------------------------
Predicted Reported Magnitude Predicted Reported Magnitude
Dec 2007 Apr 2008 of Change Dec 2007 Apr 2008 of Change
----------------------------------------------------------------------
Higher 72% 83% + 7.9% 74% 75% + 8.1%
----------------------------------------------------------------------
Same 20% 10% NA 18% 19% NA
----------------------------------------------------------------------
Lower 8% 7% - 7.4% 8% 6% - 5.9%
----------------------------------------------------------------------
Net
Average + 3.3% + 6.0% + 3.6% + 5.7%
----------------------------------------------------------------------
*T
PRICES -- Predicted Changes Between End of 2007 and End of 2008
Manufacturing
When asked to predict 2008 price changes, 85 percent of
respondents expect prices they pay to increase by 10.3 percent. At the
same time, 7 percent anticipate decreases averaging 3.9 percent.
Including the 8 percent who expect no change in prices, survey
respondents expect net average prices to increase 8.5 percent for
2008, which is greater than the December 2007 prediction of 4.3
percent. Industries predicting increases in prices greater than 6
percent for all of 2008 are: Petroleum & Coal Products; Fabricated
Metal Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral
Products; Machinery; Printing & Related Support Activities; Chemical
Products; and Transportation Equipment.
Non-Manufacturing
Non-manufacturing respondents expect prices they pay to increase
an average of 6.7 percent over the entire year. Eighty-one percent of
the respondents anticipate price increases averaging 8.6 percent. Five
percent of the respondents expect decreases of 7.2 percent, and 14
percent do not expect prices to change. Industries expecting
higher-than-average rates of price increases in 2008 are: Real Estate,
Rental & Leasing; Accommodation & Food Services; Arts, Entertainment &
Recreation; Construction; Mining; Wholesale Trade; Public
Administration; Management of Companies & Support Services;
Agriculture, Forestry, Fishing & Hunting; and Health Care & Social
Assistance.
-0-
*T
Prices - Predicted Changes Between End of 2007 and End of 2008
----------------------------------------------------------------------
Manufacturing Non-Manufacturing
----------------------------------------------------------------------
Predicted Predicted Magnitude Predicted Predicted Magnitude
Dec 2007 Apr 2008 of Change Dec 2007 Apr 2008 of Change
----------------------------------------------------------------------
Higher 79% 85% + 10.3% 77% 81% + 8.6%
----------------------------------------------------------------------
Same 12% 8% NA 13% 14% NA
----------------------------------------------------------------------
Lower 9% 7% - 3.9% 10% 5% - 7.2%
----------------------------------------------------------------------
Net
Average + 4.3% + 8.5% + 4.0% + 6.7%
----------------------------------------------------------------------
*T
EMPLOYMENT
Change in Overall Employment - Balance 2008
Manufacturing
ISM's Manufacturing Business Survey respondents forecast that
manufacturing employment will increase 2.9 percent in 2008, with 19
percent expecting employment to be 25 percent higher. This is in
contrast to the 25 percent who predict employment to be lower by 7.1
percent. The remaining 56 percent of respondents expect their
employment levels to be unchanged in 2008. Industries reporting
expectations for 1 percent growth or more in employment during the
year are: Fabricated Metal Products; Petroleum & Coal Products;
Transportation Equipment; Furniture & Related Products; Miscellaneous
Manufacturing(a); and Printing & Related Support Activities.
Non-Manufacturing
ISM's Non-Manufacturing Business Survey Committee members forecast
that employment will increase 0.7 percent during the balance of 2008.
For the remaining months of 2008, 21 percent expect higher levels of
employment, 21 percent anticipate lower levels and 58 percent expect
their employment levels to be unchanged. Industries anticipating at or
above average increases in their employment in the coming months of
2008 are: Mining; Construction; Professional, Scientific & Technical
Services; Public Administration; Utilities; Other Services(b); and
Retail Trade.
-0-
*T
Predicted Change in Overall Employment
----------------------------------------------------------------------
Manufacturing Non-Manufacturing
----------------------------------------------------------------------
Predicted Balance of Nominal Predicted Balance of Nominal
for 2008 2008 Change for 2008 2008 Change
Dec 2007 April 2008 Dec 2007 April 2008
======================================================================
Higher 26% 19% + 25% 28% 21% + 11.7%
----------------------------------------------------------------------
Same 56% 56% NA 54% 58% NA
----------------------------------------------------------------------
Lower 18% 25% - 7.1% 18% 21% - 8.4%
----------------------------------------------------------------------
Net
Average + 1.6% + 2.9% + 0.5% + 0.7%
----------------------------------------------------------------------
Diffusion
Index 54% 47% 55% 50%
----------------------------------------------------------------------
*T
BUSINESS REVENUES
Business Revenues Comparison -- 2008 vs. 2007
Manufacturing
Looking ahead, expectations are modest for increased revenues in
2008 as purchasing and supply management executives indicate an
overall net nominal increase of 1 percent in business revenues for
2008 over 2007. This is significantly less than the 6.8 percent
increase that was forecast in December 2007 for all of 2008, and less
than the 2.4 percent reported for 2007. Forty-two percent of
respondents say that nominal revenues (before adjusting for inflation)
will increase an average of 9.2 percent over 2007. Conversely, 31
percent say their nominal revenues will decrease an average of 9.3
percent, and the remaining 27 percent indicate no change. The
industries expecting revenue gains of 2.2 percent or higher in 2008
are: Electrical Equipment, Appliances & Components; Primary Metals;
Miscellaneous Manufacturing(a); Machinery; Food, Beverage & Tobacco
Products; Paper Products; Plastics & Rubber Products; and Chemical
Products.
-0-
*T
Manufacturing Business Revenues
----------------------------------------------------------------------
2007 vs 2006 2008 vs 2007
----------------------------------------------------------------------
Reported Nominal Predicted Nominal Predicted Nominal
Dec 2007 % Change Dec 2007 % Change April 2008 % Change
----------------------------------------------------------------------
Higher 53% + 11.3% 62% + 13.5% 42% + 9.2%
----------------------------------------------------------------------
Same 16% NA 22% NA 27% NA
----------------------------------------------------------------------
Lower 31% - 11.5% 16% - 9.3% 31% - 9.3%
----------------------------------------------------------------------
Net
Average + 2.4% + 6.8% + 1.0%
----------------------------------------------------------------------
*T
Non-Manufacturing
Non-manufacturing respondents forecast that business revenues for
2008 will increase 2.7 percent compared to 2007. This is higher than
the 2 percent predicted in December 2007 for 2008. The 43 percent of
respondents forecasting better business in 2008 than in 2007 estimate
an average nominal revenue increase of 12 percent. This is in contrast
to an average nominal decrease of 12.8 percent forecast by the 19
percent who predict less business in 2008. The remaining 38 percent
see no change in revenues for 2008. Industries expecting a 2.7 percent
or greater increase in revenues in 2008 are: Construction;
Professional, Scientific & Technical Services; Wholesale Trade;
Agriculture, Forestry, Fishing & Hunting; Other Services(b); Retail
Trade; and Utilities.
-0-
*T
Non-Manufacturing Business Revenues
----------------------------------------------------------------------
2007 vs 2006 2008 vs 2007
----------------------------------------------------------------------
Reported Nominal Predicted Nominal Predicted Nominal
Dec 2007 % Change Dec 2007 % Change April 2008 % Change
----------------------------------------------------------------------
Higher 52% + 8.3% 54% + 8.7% 43% + 12.0%
----------------------------------------------------------------------
Same 29% NA 34% NA 38% NA
----------------------------------------------------------------------
Lower 19% - 15.7% 12% - 21.9% 19% - 12.8%
----------------------------------------------------------------------
Net
Average + 1.3% + 2.0% + 2.7%
----------------------------------------------------------------------
*T
SUMMARY
Manufacturing
-- Operating rate is currently 78.6 percent of normal capacity.
-- Production capacity is expected to increase 2.5 percent in
2008.
-- Capital expenditures are expected to increase 1 percent in
2008.
-- Prices paid increased 6 percent through the end of April 2008.
-- Prices are expected to increase an additional 2.5 percent for
a total increase of 8.5 percent for all of 2008.
-- Manufacturing employment is expected to increase 2.9 percent
during the remainder of 2008.
-- Manufacturing revenues are expected to increase 1 percent in
2008.
-- Overall, manufacturing is expected to grow marginally in 2008.
Non-Manufacturing
-- Operating rate is currently 85.9 percent of normal capacity.
-- Production capacity is expected to increase 3.9 percent in
2008.
-- Capital expenditures are expected to decrease 2.7 percent in
2008.
-- Prices paid increased 5.7 percent through the end of April
2008.
-- Prices are expected to increase an additional 1 percent for a
total increase of 6.7 percent for all of 2008.
-- Non-manufacturing employment is expected to increase 0.7
percent during the balance of 2008.
-- Non-manufacturing revenues are expected to increase 2.7
percent in 2008.
-- Overall, non-manufacturing is growing at a slower but
sustainable rate.
(a) Miscellaneous items include: Products such as Medical
Equipment and Supplies, Jewelry, Sporting Goods, Toys and Office
Supplies.
(b) Other Services include: Equipment & Machinery Repairing;
Promoting or Administering Religious Activities; Grantmaking;
Advocacy; and Providing Dry-Cleaning & Laundry Services, Personal Care
Services, Death Care Services, Pet Care Services, Photofinishing
Services, Temporary Parking Services, and Dating Services.
In addition to the forecast, the Manufacturing ISM Report on
Business(R) is issued monthly on the first business day of each month
and is considered by many economists to be the most reliable near-term
economic barometer available. It is reviewed regularly by top
government agencies and economic business leaders. The report,
compiled from responses to questions asked of approximately 350
purchasing and supply executives across the country, tracks industrial
production, new orders, inventories, supplier deliveries, employment,
buying policies and prices. Manufacturing Business Survey Committee
responses are divided into the following NAICS code categories: Food,
Beverage & Tobacco Products; Textile Mills; Apparel, Leather & Allied
Products; Wood Products; Paper Products; Printing & Related Support
Activities; Petroleum & Coal Products; Chemical Products; Plastics &
Rubber Products; Nonmetallic Mineral Products; Primary Metals;
Fabricated Metal Products; Machinery; Computer & Electronic Products;
Electrical Equipment, Appliances & Components; Transportation
Equipment; Furniture & Related Products; and Miscellaneous
Manufacturing(a). The report has been issued by the association since
1931, except during World War II.
Covering the non-manufacturing sector, ISM debuted the
Non-Manufacturing ISM Report On Business(R) in June 1998. The
Non-Manufacturing ISM Report On Business(R) is released on the third
business day of each month, and is based on data received from
purchasing and supply executives from 18 different non-manufacturing
industries across the country. The Non-Manufacturing ISM Report On
Business(R) is diversified by NAICS, based on each industry's
contribution to gross domestic product (GDP). The Non-Manufacturing
Business Survey Committee responses are divided into the following
NAICS code categories: Agriculture, Forestry, Fishing & Hunting;
Mining; Utilities; Construction; Wholesale Trade; Retail Trade;
Transportation & Warehousing; Information; Finance & Insurance; Real
Estate, Rental & Leasing; Professional, Scientific & Technical
Services; Management of Companies & Support Services; Educational
Services; Health Care & Social Assistance; Arts, Entertainment &
Recreation; Accommodation & Food Services; Other Services(b); and
Public Administration. The report covers business activity, new
orders, backlog of orders, new export orders, inventory change,
inventory sentiment, imports, prices, employment, and supplier
deliveries.
The Manufacturing and Non-Manufacturing ISM Report On Business(R)
is published monthly by the Institute for Supply Management(TM). The
Institute for Supply Management(TM), established in 1915, is the
largest supply management organization in the world as well as one of
the most respected. ISM's mission is to lead the supply management
profession through its standards of excellence, research, promotional
activities and education.
The full text version of the reports is posted on ISM's Home Page
at www.ism.ws on the first and third business day of every month after
10:10 a.m. (ET).
The next Manufacturing ISM Report On Business(R) featuring the May
2008 data will be released at 10:00 a.m. (ET) on Monday, June 2, 2008.
The next Non-Manufacturing ISM Report On Business(R) featuring the
May 2008 data will be released at 10:00 a.m. (ET) on Wednesday, June
4, 2008.
Institute for Supply Management, Tempe
Rose Marie Goupil, 800-888-6276, ext. 3015
email: rgoupil@ism.ws
Copyright Business Wire 2008
