ISM: U.S. Economic Growth to Continue in 2019

Written by Tim Triplett

The U.S. economy is on track to grow further next year, say purchasing executives surveyed by the Institute for Supply Management, continuing the trend that began in mid-2009. In its December 2018 Semiannual Economic Forecast, ISM reported that the manufacturing sector is optimistic about business conditions in 2019, with revenues expected to increase in 17 manufacturing industries.

Sixty-four percent of the supply chain executives responding to ISM’s poll expect revenues to be greater in 2019 than in 2018. The net increase in overall revenues next year is forecast at 5.7 percent. The 17 manufacturing industries expecting revenue improvement in 2019, listed in order, are: Miscellaneous Manufacturing; Wood Products; Fabricated Metal Products; Printing & Related Support Activities; Primary Metals; Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Transportation Equipment; Furniture & Related Products; Chemical Products; Electrical Equipment, Appliances & Components; Paper Products; Computer & Electronic Products; Textile Mills; Machinery; Food, Beverage & Tobacco Products; and Plastics & Rubber Products.

“Manufacturing purchasing and supply executives are optimistic about their overall business prospects for the first half of 2019, with business continuing to expand at a slower rate through the second half of 2019,” said Timothy Fiore, chairman of ISM’s Manufacturing Business Survey Committee.

In the manufacturing sector, respondents report operating at 85.2 percent of their normal capacity, down 0.6 percentage point from the 85.8 percent reported in May 2018. The panel predicts prices paid for raw materials will increase by 3.5 percent during the first five months of 2019, with an overall increase of 3.3 percent for the year. They predict capital expenditures will increase by 6 percent in 2019, less than half the 13.4 percent increase reported for 2018. Employment in the sector is expected to grow by 2.4 percent in 2019, while labor and benefit costs are expected to increase an average of 2.5 percent. Respondents also expect the U.S. dollar to strengthen against all seven currencies of major trading partners in 2019, as was the case in 2018.

Compared to ISM’s manufacturing outlook for 2018 reported in December 2017, survey respondents this year are less optimistic about the outlook for 2019. Forty-eight percent believe 2019 will be better than 2018. Thirty-six percent believe 2019 will be the same as 2018, and 16 percent believe 2019 will be worse than 2018. The resulting diffusion index for the 2019 outlook is 65.8 percent, compared with 81.5 percent for 2018 from one year ago.

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