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




Economic Growth Forecast to Continue in 2004

FOR RELEASE: April 27, 2004

Contact: Kristen Kioa
  ISM, Media Relations
  Tempe, Arizona
  (800) 888-6276, ext. 3015
Manufacturing Expansion Continues
Revenue to Grow by 9.7%
Capital Spending up 6%
Capacity Utilization at 85.6%
Non-Manufacturing to Maintain Strength
Revenue Growth to be 6.3%
Capital Spending up 4.9%
Capacity Utilization at 85.4%

(New York, NY) — Economic growth in the United States will strengthen in 2004, say the nation's purchasing and supply executives in their 67th Semiannual Economic Forecast. Expectations for 2004 are encouraging in both the manufacturing and non-manufacturing sectors, and both sectors are optimistic about the balance of the year. The overall prediction is for economic growth to continue at a relatively strong level in 2004.

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 Corporation; and by Ralph G. Kauffman, Ph.D., C.P.M., chair of the ISM Non-Manufacturing Business Survey Committee and coordinator of the purchasing and supply management program at the University of Houston-Downtown.

Manufacturing Summary

Expectations for 2004 are high as 81 percent of survey respondents expect revenues to be greater in 2004 than in 2003. The panel of purchasing and supply executives expects a 9.7 percent net increase in overall revenues for 2004, compared to an increase of 2.8 percent increase reported for 2003. Manufacturing industries expecting the greatest improvement over 2004 are – listed in order – Glass, Stone & Aggregate; Industrial & Commercial Equipment & Computers; Primary Metals; Miscellaneous*; and Furniture.

"Manufacturing purchasing and supply executives are optimistic about their organizations' prospects for the balance of 2004," said Ore. "At present, the sector is in the midst of a solid recovery as manufacturing is in its 10th consecutive month of growth as reported in the monthly Manufacturing ISM Report On Business®. Manufacturing seemingly has significant momentum at this point, with near-record strength in new orders and production. The manufacturing sector has a new set of challenges going forward as fear of inflation, higher energy costs, materials shortages and the weaker dollar dominate the list of concerns."

In the sector, respondents report operating at 85.6 percent of their normal capacity, up from 80.1 percent reported in December 2003. Purchasing and supply executives predict that capital expenditures will increase 6 percent in 2004, compared to the 2.7 percent increase reported for 2003. Survey respondents also forecast that they will continue to reduce their purchased inventory-to-sales ratio in 2004. Manufacturers have an expectation that employment in the sector will grow by 4 percent, while labor and benefits costs are expected to rise an average of 2.4 percent. Manufacturing purchasers are predicting growth in exports and imports, with exports growing at a slightly faster rate compared with imports. They also expect the U.S. dollar to maintain its current relative position against currencies of major trading partners, although it has lost some of its strength since December 2003. They predict the prices they pay will increase 6.7 percent during the first four months of 2004, and will increase an additional 0.9 percent for the balance of 2004, resulting in significant price escalation for the year.

A special question was asked of purchasing and supply executives to determine their progress in achieving efficiency from the application of technology to supply management. While a few companies rate themselves as being almost finished, 80 percent are less than three-fourths complete in achieving efficiency from the application of technology.

Non-Manufacturing Summary

Sixty-six percent of non-manufacturing purchasing and supply executives expect their 2004 revenues to be greater than in 2003. They currently expect a 6.3 percent net increase in overall revenues compared to a 4.6 percent increase reported for 2003. Non-manufacturing industries expecting the greatest improvement over 2003 are – listed in order – Transportation; Business Services; Wholesale Trade; Retail Trade; Real Estate; Mining; Agriculture; Entertainment; and Insurance.

"Non-manufacturing purchasers report operating at 85.4 percent of their normal capacity, slightly below the 85.6 percent reported in December 2003, but above the 84.2 percent reported in May 2003. They have the same level of optimism about the next 12 months as they had last December, but are much more optimistic than they were one year ago in May 2003," said Kauffman. "While they forecast that their capacity to produce products and provide services will rise by 4.2 percent during 2004, capital expenditures are expected to increase by a slightly greater 4.9 percent above the 2003 level. Non-manufacturers also predict that their employment will grow by 1.9 percent during the remaining months of 2004. Their major economic concerns are: energy price increases; inflation and other price increases; employment benefit costs, particularly healthcare; effects of war and geopolitical concerns; and economic concerns."

Purchasers in non-manufacturing industries expect that the prices they pay for materials and services will increase by a significant 4.5 percent during 2004. They also forecast a 2.7 percent increase in their overall labor and benefit costs for 2004. Profit margins are reported to have increased in the period since November 2003, and members expect them to rise additionally in the remaining months of 2004. Members indicate that they have achieved an average 56 percent of potential benefits from application of technology to supply chains and that technology improvements, including automation and software, are their major means of improving supply chains in 2004. Overall they expect business in the first half of 2004 to be better than the second half of 2003, and the second half of 2004 to be better than the first half of this year.

Operating Rate

Manufacturing

Purchasing and supply executives report that their companies are currently operating at 85.6 percent of normal capacity. This is a significant increase from December 2003 (80.1 percent), and is greater than 85 percent for the first time since May 2000. Recent monthly data from the Manufacturing Report On Business® indicates the manufacturing sector has grown for the past 10 months. The following 10 industries are operating at levels above 85.6 percent of capacity: Paper; Primary Metals; Apparel; Food; Wood & Wood Products; Printing & Publishing; Chemicals; Glass, Stone & Aggregate; Textiles; and Transportation & Equipment.

Non-Manufacturing

Non-manufacturing purchasing and supply executives report that their organizations are currently operating at 85.4 percent of normal capacity. This is slightly lower than the 85.6 percent reported in December 2003, but higher than the 84.2 percent reported in May 2003. Considering production capacity increases reported in the following section of this forecast, this indicates that non-manufacturing industries are continuing to add capacity and to employ it at about the same rate. The following industries are operating at capacity levels above 80 percent: Real Estate; Transportation; Public Administration; Insurance; Utilities; Agriculture; Finance & Banking; Entertainment; Retail Trade; Wholesale Trade; Other Services**; and Mining.

Operating Rate
  Manufacturing Non-Manufacturing
  May 2003 Dec 2003 April 2004 May 2003 Dec 2003 April 2004
90%+ 35% 34% 48.7% 46% 53% 48%
50%-89% 59% 62% 48.2% 53% 46% 49%
Below 50% 6% 4% 3.1% 1% 1% 3%
Est. Overall Average 79% 80.1% 85.6% 84.2% 85.6% 85.4%


Production Capacity – April 2004

Manufacturing

Production capacity is now expected to increase 5.2 percent in 2004. This compares to an expected increase of 3.8 percent in the December 2003 forecast for 2004, as 53 percent of purchasing and supply executives reported an average capacity increase of 12.1 percent, 9 percent reported decreases averaging 12.8 percent, and 38 percent reported no change. The principal means of achieving increases in production capacity in 2004 are expected to be – in order of importance:

  1. More hours worked with existing personnel
  2. Additional personnel (permanent, temporary or contract)
  3. Additional plant and/or equipment
  4. Replaced equipment with technically advanced equipment
  5. Fewer plant shutdowns of operations or facilities
Manufacturing Production Capacity
  For 2003 For 2004 For 2004
  Reported
Dec 2003
Magnitude
of Change
Predicted
Dec 2003
Magnitude
of Change
Predicted
April 2004
Magnitude
of Change
Higher 41% +10.4% 50% +10.9% 53% +12.1%
Same 43% NA 41% NA 38% NA
Lower 16% -17.8% 9% -18.2% 9% -12.8%
Net Average   +1.2%   +3.8%   +5.2%


Non-Manufacturing

The capacity to produce products or provide services in the non-manufacturing sector is expected to increase 4.2 percent during 2004. This compares to an increase of 3.1 percent reported for 2003 and a prediction in December 2003 of a 4.4 percent increase in 2004. For 2004, 40 percent of non-manufacturing purchasers expect their capacity to increase by an average of 11.9 percent, and 5 percent of respondents foresee their capacity decreasing by an average of 8.5 percent. Fifty-five percent expect no change in their capacity. The industries expecting to add more than 3 percent to their capacity are: Entertainment; Retail Trade; Wholesale Trade; Insurance; Communication; Health Services; Other Services**; and Finance & Banking.

The principal means of achieving increases in production or provision capacity in 2004 are (in order of importance):

  1. Additional personnel (permanent, temporary or contract)
  2. More hours worked with existing personnel
  3. Additional plant and/or equipment
  4. Replace equipment with technically advanced equipment
  5. Fewer shutdowns of operations or facilities
Non-Manufacturing Production or Provision Capacity
  For 2003 For 2004 For 2004
  Reported
Dec 2003
Magnitude
of Change
Predicted
Dec 2003
Magnitude
Change
Predicted
April 2004
Magnitude
Change
Higher 32% +12.8% 41% +12.1% 40% +11.9%
Same 62% NA 57% NA 55% NA
Lower 6% -18.9% 2% -31.0% 5% -8.5%
Net Average   +3.1%   +4.4%   +4.2%


Predicted Capital Expenditures – 2004 vs. 2003

Manufacturing

Purchasing and supply managers expect capital expenditures to rise 6 percent in 2004. This compares to the prediction of 3.2 percent in the December 2003 forecast for 2004. The 39 percent of purchasers who predict increased capital expenditures in 2004 indicate an average increase of 32.1 percent, while the 21 percent who said their capital spending will be reduced predict an average decrease of 21 percent. Forty percent said they expect to spend the same in 2004 as in 2003. Industries showing the largest increases in capital expenditures for 2004 – in order of percentage increase – are: Primary Metals; Wood & Wood Products; Printing & Publishing; Industrial & Commercial Equipment & Computers; Fabricated Metals; and Transportation & Equipment.

Non-Manufacturing

Non-manufacturing purchasing and supply executives are expecting to increase their level of capital expenditures in 2004 compared to 2003 by 4.9 percent. This is a relatively strong vote of confidence in the continuation of recent indications of strong business activity in the monthly Non-Manufacturing Report On Business®. The 46 percent of members expecting to spend more predict an average increase of 16.5 percent. An additional 17 percent anticipate a decrease averaging 15 percent. However, 37 percent expect to spend the same on capital expenditures in 2004 as in 2003. Industries expecting the greatest increases in capital expenditures in 2004 are: Retail Trade; Agriculture; Utilities; Health Services; Construction; Communication; Other Services**; Wholesale Trade; Business Services; and Finance & Banking.

Predicted Capital Expenditures 2004 vs. 2003
  Manufacturing Non-Manufacturing
  Predicted
Dec 2003
Reported
April 2004
Magnitude
of Change
Predicted
Dec 2003
Reported
April 2004
Magnitude
of Change
Higher 36% 39% +32.1% 49% 46% +16.5%
Same 44% 40% NA 34% 37% NA
Lower 20% 21% -30.1% 17% 17% -15%
Net Average -3.2%   +6.0% +7.1%   +4.9%


Prices – Changes Between End of 2003 and April 2004

Manufacturing

After an initial forecast in December 2003 of a 1 percent increase in prices paid during the first four months of 2004, purchasers report a significant shift in pricing trends. They now report an expected increase of 6.7 percent for the period, as the 77 percent who say their prices are higher now than at the end of 2003 report an average increase of 9.5 percent, while the 12 percent who report lower prices averaged a 4.3 percent decrease. The remaining 11 percent indicate no change between the end of 2003 and April 2004. Industries experiencing higher than average price increases are: Fabricated Metals; Primary Metals; Transportation & Equipment; Industrial & Commercial Equipment & Computers; and Glass, Stone & Aggregate.

Non-Manufacturing

Non-manufacturing members report that their purchases in the first four months of this year cost an average of 3.3 percent more than they would have at the end of 2003. This is a relatively strong rate of increase in prices compared to recent years. Sixty-six percent of non-manufacturing purchasers report the prices they paid increased an average of 6.2 percent in the first part of 2004. Also, 9 percent report price decreases averaging 8.7 percent. The remaining 25 percent indicate no change in prices in the first four months of 2004. Industries reporting the largest increase in prices they pay in the first part of 2004 are: Construction; Entertainment; Wholesale Trade; Utilities; Communication; Public Administration; and Mining.

Prices – Changes Between End of 2003 and April 2004
  Manufacturing Non-Manufacturing
  Predicted Dec 2003 Reported April 2004 Magnitude of Change Predicted Dec 2003 Reported April 2004 Magnitude of Change
Higher 47% 77% +9.5% 49% 66% +6.2%
Same 28% 11% NA 35% 25% NA
Lower 25% 12% -4.3% 16% 9% -8.7%
Net Average +1.0%   +6.7% +1.5%   +3.3%


Prices – Predicted Changes Between End of 2003 and End of 2004

Manufacturing

The forecast indicates respondents expect price increases to moderate during the period of May through December 2004 at a rate of 0.9 percent. They predict a net average increase of 7.6 percent between December 2003 and December 2004. Eighty-one percent expect an average price increase of 10.1 percent, while 11 percent expect an average decline of 5.5 percent. The remaining 8 percent expect no change in their average prices paid for the year. Industries expecting to pay above average prices by the end of 2004 are: Fabricated Metals; Primary Metals; Transportation & Equipment; Food; and Glass, Stone & Aggregate.

Non-Manufacturing

Looking out to the end of 2004, non-manufacturing purchasers expect prices they pay to increase by 4.5 percent over the entire year. Seventy-six percent of purchasers anticipate price increases averaging 6.8 percent. Ten percent of purchasers expect decreased prices with an average reduction of 6.3 percent, and 14 percent of members do not expect prices to change. Industries expecting the highest rates of price increases in 2004 are: Construction; Entertainment; Wholesale Trade; Communication; Agriculture; Mining; Utilities; Insurance; Public Administration; Transportation; Other Services**; and Health Services.

Prices – Predicted Changes Between End of 2003 and End of 2004
  Manufacturing Non-Manufacturing
  Predicted Dec 2003 Predicted April 2004 Magnitude of Change Predicted Dec 2003 Predicted April 2004 Magnitude of Change
Higher 56% 81% +10.1% 60% 76% +6.8%
Same 18% 8% NA 22% 14% NA
Lower 26% 11% -5.5% 18% 10% -6.3%
Net Average +1.3%   +7.6% +2.1%   +4.5%


Labor and Benefits Cost – Predicted Rate Change End of 2003 vs. End of 2004

Manufacturing

Purchasing and supply executives' expectation for change in overall labor and benefit costs for 2004 are slightly lower than they were in December 2003 for 2004. Seventy percent of members expect increased labor and benefit costs and expect them to grow by an average of 4.1 percent for all of 2004, while the 6 percent forecasting lower costs anticipate them decreasing by an average of 6.6 percent. Considering the 24 percent that believe costs will remain the same, the expected overall net rate of increase is 2.4 percent between the end of 2003 and the end of 2004. Industries expecting to pay 2.4 percent or higher are: Glass, Stone & Aggregate; Paper; Primary Metals; Chemicals; Instruments & Photographic Equipment; Apparel; Transportation & Equipment; Food; Miscellaneous*; and Wood & Wood Products.

Non-Manufacturing

Purchasing and supply executives' expectation for change in labor and benefit costs for non-manufacturing industries in 2004 is an increase of 2.7 percent. Sixty-five percent of respondents expect such costs to increase by an average 4.5 percent. Another 5 percent of purchasers expect labor and benefit costs to shrink by an average 5.1 percent, and 30 percent believe costs will remain stable during 2004. Industries expecting the largest increases in labor and benefit costs in 2004 over 2003 are: Business Services; Construction; Insurance; Public Administration; Other Services**; Communication; Health Services; Wholesale Trade; and Entertainment.

Labor and Benefit Costs – Predicted Rate Change End of 2003 vs. End of 2004
  Manufacturing Non-Manufacturing
  Predicted
for 2004
Dec 2003
Predicted
for 2004
April 2004
Magnitude
of Change
Predicted
for 2004
Dec 2003
Predicted
for 2004
April 2004
Magnitude
of Change
Higher 78% 70% +4.1% 68% 65% +4.5%
Same 19% 24% NA 27% 30% NA
Lower 3% 6% -6.6% 5% 5% -5.1%
Net Average +2.7%   +2.4% +2.5%   +2.7%


Employment

Change in Overall Employment – Balance 2004

Manufacturing

ISM's Manufacturing Business Survey Committee members report a net average increase of 1.2 percent for the period from November 2003 to April 2004. Prospects for the balance of 2004 appear to be better, as members now forecast that manufacturing employment will increase by 2.8 percent during the balance of 2004, with 43 percent expecting employment to be 8.9 percent higher. This is compared to the 13 percent who predict employment to be lower by 7.3 percent. The remaining 44 percent of members expect their employment levels to be unchanged in 2004. Industries expecting the highest increases in employment through the remainder of this year are: Glass, Stone & Aggregate; Industrial & Commercial Equipment & Computers; Apparel; Primary Metals; and Wood & Wood Products.

Non-Manufacturing

ISM's Non-Manufacturing Business Survey Committee members report that non-manufacturing employment has decreased 0.1 percent since November 2003. They forecast that employment will increase 1.9 percent during the balance of 2004. For the remaining months of 2004, 37 percent expect higher levels of employment, 12 percent of members anticipate lower levels, and 51 percent expect their employment levels to be unchanged. Industries anticipating increases in their employment in the coming months of 2004 are: Construction; Business Services; Retail Trade; Communication; Entertainment; Wholesale Trade; Health Services; Utilities; Other Services**; Insurance; and Finance & Banking.

Predicted Change in Overall Employment
  Manufacturing Non-Manufacturing
  Predicted for 2004
Dec 2003
Balance of 2004
April 2004
Nominal
Change
Predicted for 2004
Dec 2003
Balance of 2004
April 2004
Nominal
Change
Higher 36% 43% +8.9% 35% 37% +6.7%
Same 47% 44% NA 50% 51% NA
Lower 17% 13% -7.3% 15% 12% -4.7%
Net Average +0.3%   +2.8% +1.4%   +1.9%
Diffusion Index 59.5%   65% 60%   62.5%


Export Business – Predicted Change for Next Half Year (Second Half of 2004)

Manufacturing

The responses for this semiannual report indicate purchasers continue to be optimistic about new export orders for the second half of 2004. This is consistent with recent ISM New Export Orders Index data in the monthly Manufacturing Report On Business®, which has shown a faster rate of growth in new export orders. Of the 82 percent of members who export, 59 percent predict an increase (54 percent moderate and 5 percent substantial) over the next half year. Additionally, 4 percent (3 percent moderate, 1 percent substantial) see a decrease in their exports and 37 percent anticipate no change in exports over the next half-year. Eleven industries expect above average growth in exports: Instruments & Photographic Equipment; Glass, Stone & Aggregate; Furniture; Apparel; Industrial & Commercial Equipment & Computers; Paper; Miscellaneous*; Transportation & Equipment; Chemicals; Fabricated Metals; and Electronic Components & Equipment.

Non-Manufacturing

For the next half year, non-manufacturing purchasing and supply executives who report that their organizations engage in exporting feel less optimistic than they did in December 2003 concerning their export business. Of the 15 percent of non-manufacturing business survey respondents who report that they export, 32 percent predict an increase (32 percent moderate and 0 percent substantial) over the next half year. Fourteen percent of members see a decrease in their exports (14 percent moderate and 0 percent substantial), and 54 percent anticipate no change in exports over the next half year. Of the industries that report they export, the following expect growth in export business in the second half of 2004: Communication; Retail Trade; Other Services**; and Business Services.

Predicted Change in Export Business Next Half Year
  Manufacturing Non-Manufacturing
  First Half of 2004
Predicted Dec 2003
Second Half of 2004
Predicted April 2004
First Half of 2004
Predicted Dec 2003
Second Half of 2004
Predicted April 2004
Substantial Increase 4% 5% 0% 0%
Moderate Increase 47% 54% 42% 32%
No Change 41% 37% 55% 54%
Moderate Decrease 7% 3% 0% 14%
Substantial Decrease 1% 1% 3% 0%
Diffusion Index 71.5% 77.5% 69.5% 59%


Import Business – Predicted Change for Next Half Year (Second Half of 2004)

Manufacturing

Purchasers expect continued growth in imports in the second half of 2004. Of the 87 percent of purchasers who import, 56 percent predict an increase in their imports over the next half year (43 percent moderate and 13 percent substantial), while 8 percent predict a decrease in imports of materials (7 percent moderate and 1 percent substantial). More than one-third of survey members (36 percent) expect no change in imports. The eight industries expecting above average growth in imports are: Furniture; Electronic Components & Equipment; Industrial & Commercial Equipment & Computers; Apparel; Fabricated Metals; Transportation & Equipment; Instruments & Photographic Equipment; and Chemicals.

Non-Manufacturing

Non-manufacturers have a slightly lower expectation for use of imports for the next half year than they did in December 2003 for the first half of 2004. Of the 37 percent of non-manufacturing organizations who import, 47 percent (29 percent moderate and 18 percent substantial) predict an increase in their imports during the second half of 2004. Nine percent (7 percent moderate and 2 percent substantial) predict a decrease in imports of materials and services. The remaining 44 percent of purchasers expect no change in imports over the next half year. Industries expecting growth in imports are: Construction; Wholesale Trade; Entertainment; Transportation; Business Services; Other Services**; Mining; Utilities; and Retail Trade.

Predicted Change in Import Business Next Half Year
  Manufacturing Non-Manufacturing
  First Half of 2004
Predicted Dec 2003
Second Half of 2004
Predicted April 2004
First Half of 2004
Predicted Dec 2003
Second Half of 2004
Predicted April 2004
Substantial Increase 16% 13% 13% 18%
Moderate Increase 49% 43% 39% 29%
No Change 30% 36% 43% 44%
Moderate Decrease 3% 7% 5% 7%
Substantial Decrease 2% 1% 0% 2%
Diffusion Index 80% 74% 73.5% 69%


Business Revenues

Business Revenues Comparison – 2004 vs. 2003

Manufacturing

Summarizing revenues for 2004, 81 percent say revenues will be better than 2003 and that their nominal (before adjusting for inflation) revenues will increase an average of 13 percent over 2003. Conversely, 8 percent say their nominal revenues will decrease in 2004 by an average of 11.2 percent, and the remaining 11 percent indicate no change. Purchasing and supply executives indicate an overall net nominal increase of 9.7 percent in business revenues for 2004 over 2003. This represents a significant increase over the 5.8 percent increase predicted for 2004 in December 2003. Industries expecting the largest increase in business revenues are: Glass, Stone & Aggregate; Industrial & Commercial Equipment & Computers; Primary Metals; Miscellaneous*; and Furniture.

Manufacturing Business Revenues – 2004 vs. 2003
  Predicted
Dec 2003
Nominal %
Change
Predicted
April 2004
Nominal %
Change
Higher 76% +10% 81% +13%
Same 16% NA 11% NA
Lower 8% -20.1% 8% -11.2%
Net Average   +5.8%   +9.7%


Non-Manufacturing

Non-manufacturing purchasers forecast that business revenues for 2004 will be improved over 2003 by 6.3 percent. This is higher than the 5.7 percent increase predicted in December 2003 for 2004 and the 4.6 percent increase reported for 2003 revenues over 2002 revenues. The 66 percent of members forecasting better business in 2004 than in 2003 estimate an average nominal (before adjusting for inflation) revenue increase of 11.6 percent. This compares to an average nominal decrease of 9.1 percent forecast by the 16 percent who predict worse business in 2004. The remaining 18 percent see no change in 2004. Industries expecting the largest percent increase in revenues in 2004 are: Transportation; Business Services; Wholesale Trade; Retail Trade; Real Estate; Mining; Agriculture; Entertainment; Insurance; Communication; and Health Services.

Non-Manufacturing Business Revenues: 2004 vs. 2003
  Predicted
Dec 2003
Nominal %
Change
Predicted
April 2004
Nominal %
Change
Higher 67% +10.5% 66% +11.6%
Same 25% NA 18% NA
Lower 8% -17.3% 16% -9.1%
Net Average   +5.7%   +6.3%


Profit Margins

Manufacturing

Survey respondents report that profit margins have improved slightly from the fourth quarter of 2003 to the first quarter of 2004, as 36 percent experienced an increase in profit margins, 29 percent had lower margins, and 35 percent reported no change. However, their expectations are for significant increases between now and the end of 2004 as 46 percent predict better profits margins (an increase of 10 percentage points), 22 percent predict lower margins (a decrease of 7 percentage points), and 32 percent predict no change (a decrease of 3 percentage points).

Non-Manufacturing

Non-manufacturing purchasing and supply executives were asked about changes in profit margins that their organizations recently experienced or were expecting in the near future. Their response indicated that 35 percent experienced an increase in profit margins during the November 2003 to April 2004 period, while 22 percent found smaller profit margins and 43 percent had no change in margins during the same period. Looking ahead over the balance of 2004, 41 percent of supply managers expect improved margins, only 16 percent expect lower profit margins, and the remaining 43 percent of members anticipate no change in their profit margins. Industries expecting increases in profit margins during the remainder of 2004 are: Entertainment; Retail Trade; Mining; Insurance; Finance & Banking; Utilities; Business Services; Communication; Other Services**; Wholesale Trade; Construction; and Health Services.

Profit Margins
  Manufacturing Non-Manufacturing
  Nov 2003 through
April 2004
Reported April 2004
April 2004 through
Dec 2004
Predicted April 2004
Nov 2003 through
April 2004
Reported April 2004
April 2004 through
Dec 2004
Predicted April 2004
Better 36% 46% 35% 41%
Same 35% 32% 43% 43%
Worse 29% 22% 22% 16%
Diffusion Index 53.5% 62% 56.5% 62.5%


Business Comparison

The First Half of 2004 with Last Half of 2003

Manufacturing

Purchasing and supply executives continue to express their optimism when asked to compare the first half of 2004 to the last half of 2003. The proportion of members who forecast the first half of 2004 to be better than the last half of 2003 is 73 percent, while 9 percent expect it to be worse, and 18 percent expect no change. The diffusion index of 82 percent is the highest reported in the history of this question. The industries predicting improvement in business in the first half of the year are: Primary Metals; Apparel; Glass, Stone & Aggregate; Wood & Wood Products; Industrial & Commercial Equipment & Computers; Textiles; Electronic Components & Equipment; Transportation & Equipment; Instruments & Photographic Equipment; and Furniture.

Non-Manufacturing

The first half of 2004 is looking better than the last half of 2003, according to non-manufacturing purchasing and supply managers. The diffusion index indicating current expectations is 72 percent compared to a predicted 73 percent in December 2003. Fifty-eight percent of members expect the first half of this year to be better than the last half of last year, 14 percent anticipate it will be worse, and 28 percent predict no change. The industries expecting the most improvement in the first half of 2004 are: Mining; Agriculture; Construction; Finance & Banking; Utilities; Business Services; Communication; Other Services**; Health Services; Entertainment; and Insurance.

Business – First Half 2004 vs. Last Half 2003
  Manufacturing Non-Manufacturing
  Predicted
Dec 2003
Predicted
April 2004
Predicted
Dec 2003
Predicted
April 2004
Better 61% 73% 54% 58%
Same 29% 18% 38% 28%
Worse 10% 9% 8% 14%
Diffusion Index 75.5% 82% 73% 72%



The Second Half of 2004 with the First Half of 2004

Manufacturing

Looking ahead to the next half year, members are slightly less optimistic about the next half year, as 59 percent predict it will be better, 9 percent predict it will be worse, and 32 percent expect no change. This is consistent with the December 2003 forecast in which respondents indicated a similar expectation. The industries predicting improvement in the second half of 2004 are: Instruments & Photographic Equipment; Paper; Rubber & Plastic Products; Furniture; Electronic Components & Equipment; Industrial & Commercial Equipment & Computers; Miscellaneous*; and Primary Metals.

Non-Manufacturing

Comparing the second half of 2004 to the first half, non-manufacturing purchasing and supply executives feel more optimism than they do for the first half of the year compared to the last half of 2003 (diffusion index of 76.5 percent compared to 72 percent). They also feel slightly more optimistic than they felt about the second half of 2004 when asked in December 2003. The proportion of members who currently forecast the second half of 2004 to be better than the first half is 61 percent, while 8 percent expect it to be worse. An additional 31 percent of purchasers expect no change. The industries expecting the greatest improvement in the second half of the year are: Construction; Communication; Finance & Banking; Entertainment; Mining; Wholesale Trade; Utilities; Retail Trade; Business Services; Agriculture; Insurance; and Real Estate.

Business – Second Half 2004 vs. First Half 2004
  Manufacturing Non-Manufacturing
  Predicted
Dec 2003
Predicted
April 2004
Predicted
Dec 2003
Predicted
April 2004
Better 54% 59% 53% 61%
Same 40% 32% 44% 31%
Worse 6% 9% 3% 8%
Diffusion Index 74% 75% 75% 76.5%


Note: A diffusion index above 50 percent would generally indicate an expectation of the second half of the current year being better than the first half.


Continued ...




Rate and Review this item

Rate this item:



Log in to rate or review this item.