Supply Execs Forecast Continued Growth
Primary and fabricated metals will be among the drivers of economic growth in the United States in 2011, according to the December 2010 Semiannual Economic Forecast from the Institute for Supply Management, Tempe, Ariz. Purchasing and supply executives surveyed by ISM expect the economic recovery that began in mid-2009 to continue.
Overall, the manufacturing sector continues to outpace the non-manufacturing sector. Revenues are expected to increase in 16 of 18 manufacturing industries in 2011, vs. just 12 of 18 non-manufacturing industries. Business investment, a major driver of the U.S. economy, will increase substantially in the manufacturing sector, while investment in the non-manufacturing sector will increase at a lower level.
“(Manufacturers) forecast that their capacity to produce products and provide services will rise by 2 percent during 2011, and capital expenditures will increase by 3.7 percent from the 2010 level,” says Norbert J. Ore, chairman of ISM’s Manufacturing Business Survey Committee.
Sixty-five percent of survey respondents expect greater revenues in 2011. ISM forecasts a 5.6 percent net increase in overall revenues for 2011, compared to the 7.9 percent increase reported for 2010. Primary metals and fabricated metals top the 16 industries expecting improvement in 2011, a list that also includes machinery and miscellaneous manufacturing.
“Manufacturing purchasing and supply executives have expectations for continued growth and are optimistic about their organizations' prospects as they consider the first half of 2011, and they are even more positive about the second half," says Ore. "While 2010 has been a year of recovery in manufacturing, our forecast sees improvements in both investment and employment in 2011.”
In the manufacturing sector, respondents report operating at 80.2 percent of their normal capacity, up from 72.8 percent reported in April 2010. They predict that capital expenditures will increase by 14.5 percent in 2011, compared to a 5.9 percent increase in 2010. They also plan to reduce inventories in an effort to improve their purchased inventory-to-sales ratio in 2011.
Manufacturers expect employment in the sector to increase by 1.8 percent, while labor and benefit costs increase an average of 1.9 percent in 2011. They also expect the U.S. dollar to weaken on average against the currencies of major trading partners, strengthening exports.