Tempe, AZ, December 10--Economic growth in the U.S. will strengthen in 2005, say the nation's purchasing and supply executives in their 68th Semiannual Economic Forecast. Expectations for 2005 are higher in both the manufacturing and non-manufacturing sectors, and both sectors are more optimistic about the coming year than they were one year ago for 2004.
The overall prediction is for economic growth to continue at a relatively strong level in 2005.
These projections are part of the forecast issued by the Business Survey Committee of the Institute for Supply Management™ (ISM). The forecast was released 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 2005 are high as 75 percent of survey respondents expect revenues to be greater in 2005 than in 2004. The panel of purchasing and supply executives expects a 7.8 percent net increase in overall revenues for 2005, compared to an increase of 8.3 percent increase reported for 2004. Manufacturing industries expecting the greatest improvement over 2004 are — listed in order — Miscellaneous*; Glass, Stone & Aggregate; Fabricated Metals; Primary Metals; Instruments & Photographic Equipment; Transportation & Equipment; Apparel; and Electronic Components & Equipment.
"Manufacturing purchasing and supply executives are optimistic about their organizations' prospects for the first half, and predict additional growth during the second half of 2005," said Ore. "While 2004 has been a particularly strong year overall, it has presented challenges with regard to inflation in manufacturing costs. At present, the sector continues to recover from major influences that stalled growth early in the millennium. Manufacturing seemingly has reasonable momentum at this point, with continuing strength in new orders and production, and is in its 18th consecutive month of growth as reported in the monthly Manufacturing ISM Report On Business®."
In the sector, respondents report operating at 83 percent of their normal capacity, down from 85.6 percent reported in April 2004. Purchasing and supply executives predict that capital expenditures will increase only 1.6 percent in 2005, compared to the 15.1 percent increase reported for 2004. Survey respondents also forecast that they will increase their purchased inventory to sales ratio in 2005. Manufacturers have an expectation that employment in the sector will grow by 1.6 percent, while labor and benefits costs are expected to increase an average of 3.4 percent. Manufacturing purchasers are predicting growth in exports and imports. They also expect the U.S. dollar to strengthen somewhat against currencies of major trading partners.
They predict the prices they pay will increase 4.3 percent during the first four months of 2005, and will increase an additional 0.1 percent for the balance of 2005. Respondents' major concerns are: prices and inflation; energy price increases; weak economy; effects of war and geopolitical concerns; and labor, benefits and healthcare costs, including labor shortages.
