--- To enhance the value and performance of procurement and SCM practitioners and their organizations worldwide ---




Spring 2008 Semiannual Economic Forecast

FOR RELEASE: May 6, 2008


Contact: Rose Marie Goupil
  ISM, Media Relations
  Tempe, Arizona
  800/888-6276, ext. 3015
  E-mail: rgoupil@ism.ws

ECONOMIC GROWTH TO CONTINUE THROUGHOUT 2008
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, AZ) — 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™ (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*; 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**; 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®. 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*; 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**; and Transportation & Warehousing.

Operating Rate
  Manufacturing Non-Manufacturing
  April
2007
Dec
2007
April
2008
April
2007
Dec
2007
April
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%


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*; and Fabricated Metal Products.

Manufacturing Production Capacity
  For 2007 For 2008 For 2008
  Reported
Dec 2007
Magnitude
of Change
Predicted
Dec 2007
Magnitude
of Change
Predicted
April 2008
Magnitude
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%
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.

Non-Manufacturing Production or Provision Capacity
  For 2007 For 2008 For 2008
  Reported
Dec 2007
Magnitude
of Change
Predicted
Dec 2007
Magnitude
of Change
Predicted
April 2008
Magnitude
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%


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*; 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.

Predicted Capital Expenditures 2008 vs. 2007
  Manufacturing Non-Manufacturing
  Predicted
Dec 2007
Predicted
April 2008
Magnitude
of Change
Predicted
Dec 2007
Predicted
April 2008
Magnitude
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%


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*; 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.

Prices — Changes Between End of 2007 and April 2008
  Manufacturing Non-Manufacturing
  Predicted
Dec 2007
Reported
April 2008
Magnitude
of Change
Predicted
Dec 2007
Reported
April 2008
Magnitude
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%


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.

Prices — Predicted Changes Between End of 2007 and End of 2008
  Manufacturing Non-Manufacturing
  Predicted
Dec 2007
Predicted
April 2008
Magnitude
of Change
Predicted
Dec 2007
Predicted
April 2008
Magnitude
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%


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*; 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**; and Retail Trade.

Predicted Change in Overall Employment
  Manufacturing Non-Manufacturing
  Predicted
For 2008
Dec 2007
Balance
of 2008
April 2008
Nominal %
Change
Predicted
For 2008
Dec 2007
Balance
of 2008
April 2008
Nominal %
Change
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%  


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*; Machinery; Food, Beverage & Tobacco Products; Paper Products; Plastics & Rubber Products; and Chemical Products.

Manufacturing Business Revenues
2007 vs 2006 2008 vs 2007
  Reported
Dec 2007
Nominal
% Change
Predicted
Dec 2007
Nominal
% Change
Predicted
April 2008
Nominal
% 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%
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**; Retail Trade; and Utilities.

Non-Manufacturing Business Revenues
2007 vs 2006 2008 vs 2007
  Reported
Dec 2007
Nominal
% Change
Predicted
Dec 2007
Nominal
% Change
Predicted
April 2008
Nominal
% 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%


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.

*Miscellaneous items include: Products such as Medical Equipment and Supplies, Jewelry, Sporting Goods, Toys and Office Supplies.

**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® 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*. 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® in June 1998. The Non-Manufacturing ISM Report On Business® 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® 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**; 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® is published monthly by the Institute for Supply Management™. The Institute for Supply Management™, 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® 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® featuring the May 2008 data will be released at 10:00 a.m. (ET) on Wednesday, June 4, 2008.



Back to Top





Rate and Review this item

Rate this item:



Log in to rate or review this item.