Economic growth is expected to continue in the U.S. throughout 2019, say the nation’s purchasing and supply executives in their Spring 2019 Semiannual Economic Forecast. Expectations for the remainder of 2019 continue to be positive in both the manufacturing and non-manufacturing sectors.

These projections are part of the forecast issued by the Institute for Supply Management (ISM) Business Survey Committees. The forecast was presented this week by Timothy Fiore CPSM, C.P.M., chair of the ISM Manufacturing Business Survey Committee; and by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, chair of the ISM Non-Manufacturing Business Survey Committee.

Manufacturing Summary
Fifty-five percent of respondents from the panel of manufacturing supply management executives predict their revenues, on average, will be 4 percent greater in 2019 compared to 2018, 11 percent expect an 11.1 percent decline, and 34 percent foresee no change in revenue. This yields an overall average forecast of 4 percent revenue growth among manufacturers for 2019. This current prediction is 1.7 percentage points below the December 2018 forecast of 5.7 percent revenue growth for 2019 and is 1.8 percentage points below the actual revenue growth reported for all of 2018. With operating rate at 84.2 percent, an expected capital expenditure increase of 5.9 percent, an increase of 1.5 percent for prices paid for raw materials, and employment expected to increase by 2 percent by the end of 2019, manufacturing is positioned to grow revenues while managing costs through the remainder of the year. 

“With 17 of the 18 manufacturing sector industries predicting revenue growth in 2019, U.S. manufacturing continues to move in a positive direction. However, finding and onboarding qualified labor and being able to pass on raw material price increases will ultimately define manufacturing revenues and profitability,” says Fiore.

The 17 industries reporting expectations of growth in revenue for 2019 — listed in order — are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Nonmetallic Mineral Products; Textile Mills; Miscellaneous Manufacturing; Furniture & Related Products; Petroleum & Coal Products; Primary Metals; Food, Beverage & Tobacco Products; Wood Products; Chemical Products; Transportation Equipment; Machinery; Fabricated Metal Products; Plastics & Rubber Products; and Paper Products.

Non-Manufacturing Summary
Forty-seven percent of non-manufacturing purchasing and supply executives expect their 2019 revenues to be greater by 9.2 percent as compared to 2018. Respondents currently expect a 3.1 percent net increase in overall revenue, which is less than the 3.7 percent increase that was forecasted in December 2018. 

“Non-manufacturing will continue to grow for the balance of 2019. Non-manufacturing companies continue to operate with extreme efficiency, which is echoed by the high percentage of capacity utilization. Supply managers have indicated that prices are projected to increase 1.5 percent over the year reflecting minimal inflation. Employment is projected to grow 1.3 percent. Seventeen out of 18 industries are forecasting increased revenues, which is more than the 16 industries that forecasted increased revenues last year. The non-manufacturing sector will continue economic growth throughout the year,” says Nieves.

The 17 non-manufacturing industries expecting increases in revenue in 2019 — listed in order — are:  Agriculture, Forestry, Fishing & Hunting; Construction; Management of Companies & Support Services; Arts, Entertainment & Recreation; Information; Other Services; Mining; Professional, Scientific & Technical Services; Accommodation & Food Services; Finance & Insurance; Wholesale Trade; Health Care & Social Assistance; Transportation & Warehousing; Public Administration; Real Estate, Rental & Leasing; Utilities; and Educational Services.

PREDICTED CAPITAL EXPENDITURES — 2019 vs. 2018

Manufacturing
Survey respondents expect a 5.9-percent increase in capital expenditures in 2019. This is nearly even with the 6-percent increase predicted by the panel in the December 2018 forecast for 2019. Currently, 32 percent of respondents predict increased capital expenditures in 2018, with an average increase of 29.3 percent, and 12 percent said their capital spending would decrease an average of 27.7 percent. Fifty-five percent say they will spend the same in 2019 as they did in 2018. The 14 industries expecting increases in capital expenditures in 2019 compared to 2018 — listed in order — are: Furniture & Related Products; Textile Mills; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Transportation Equipment; Chemical Products; Miscellaneous Manufacturing; Computer & Electronic Products; Paper Products; Apparel, Leather & Allied Products; Fabricated Metal Products; and Machinery.

Non-Manufacturing
Non-manufacturing purchasing and supply executives expect to increase their level of capital expenditures 2.1 percent in 2019 compared to 2018. The 26 percent of members expecting to spend more, predict an average increase of 20.8 percent. Fourteen percent of respondents anticipate an average decrease of 22.6 percent. Sixty percent of the respondents expect to spend the same on capital expenditures in 2019 as in 2018. The 10 industries expecting an increase in capital expenditures in 2019 from 2018 — listed in order — are: Construction; Agriculture, Forestry, Fishing & Hunting; Public Administration; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Accommodation & Food Services; Mining; Health Care & Social Assistance; Finance & Insurance; and Management of Companies & Support Services.

EMPLOYMENT

Employment – Predicted Changes Between End of 2018 and End of 2019

Manufacturing
ISM’s Manufacturing Business Survey respondents forecast that manufacturing employment will increase by 2 percent by the end of 2019, compared to the end of 2018. Thirty-six percent of respondents expect employment to be 6.7 percent higher, on average, while 8 percent of respondents predict employment to be lower by 5.2 percent. The remaining 56 percent of respondents expect their employment levels to be unchanged for the remainder of 2019. The 14 industries reporting expectations of growth in employment during 2019 — listed in order — are: Computer & Electronic Products; Textile Mills; Fabricated Metal Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Furniture & Related Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Machinery; Petroleum & Coal Products; Printing & Related Support Activities; Transportation Equipment; Chemical Products; and Paper Products.

Non-Manufacturing
ISM’s Non-Manufacturing Business Survey Committee respondents forecast that employment will increase 1.3 percent through the end of 2019. For the remaining months of 2019, 33 percent expect employment to increase, on average, 6.1 percent, 10 percent anticipate employment to decrease by 7.7 percent, and 57 percent expect their employment levels to be unchanged. The 13 industries anticipating increases in employment — listed in order — are: Construction; Arts, Entertainment & Recreation; Other Services; Professional, Scientific & Technical Services; Accommodation & Food Services; Wholesale Trade; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; Health Care & Social Assistance; Public Administration; Transportation & Warehousing; and Real Estate, Rental & Leasing.

*Change made to questionnaire in 2017. Respondents are now asked for a year-over-year employment comparison rather than a partial-year update, as previously reported. 

BUSINESS REVENUES

Business Revenues Comparison — 2019 vs. 2018

Manufacturing
Increased revenue is expected in 2019 as purchasing and supply management executives predict an overall net increase of 4 percent in sector business revenue for 2019 over 2018. This is 1.7 percentage points lower than the 5.7-percent increase forecast in December 2018 for all of 2019, and 1.8 percentage points lower than the 5.8-percent increase reported for 2018 over 2017. Fifty-five percent of respondents say that revenues for 2019 will increase 9.5 percent, on average, over 2018. Conversely, 11 percent say their revenues will decrease, on average, 11.1 percent, and the remaining 34 percent indicate no change. Of the 18 manufacturing industries, 17 are reporting expectations of growth in revenue during 2019 in the following order: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Nonmetallic Mineral Products; Textile Mills; Miscellaneous Manufacturing; Furniture & Related Products; Petroleum & Coal Products; Primary Metals; Food, Beverage & Tobacco Products; Wood Products; Chemical Products; Transportation Equipment; Machinery; Fabricated Metal Products; Plastics & Rubber Products; and Paper Products.

Non-Manufacturing
Non-manufacturing respondents forecast that sector business revenue for 2019 will increase 3.1 percent compared to 2018. This is 0.6 percent less than the 3.7 percent that was predicted in December 2018 for 2019. The 47 percent of respondents forecasting better business in 2019 than in 2018 estimate an average revenue increase of 9.2 percent. The 11 percent who predict less business in 2019 forecast an average decrease of 11.4 percent. The remaining 42 percent see no change in revenues for 2019. The 17 industries expecting an increase in revenues in 2019 — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Construction; Management of Companies & Support Services; Arts, Entertainment & Recreation; Information; Other Services; Mining; Professional, Scientific & Technical Services; Accommodation & Food Services; Finance & Insurance; Wholesale Trade; Health Care & Social Assistance; Transportation & Warehousing; Public Administration; Real Estate, Rental & Leasing; Utilities; and; Educational Services.