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Economic growth forecast for remainder of 2015

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Economic growth is expected to continue in the United States throughout the remainder of 2015, say the nation's purchasing and supply executives in their Spring 2015 Semiannual Economic Forecast. Expectations for the remainder of 2015 continue to be positive 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®).

A brief summary includes:

Manufacturing

  • Operating rate is currently 79.5 percent of normal capacity.
  • Production capacity is expected to increase 3.4 percent in 2015.
  • Capital expenditures are expected to increase 3.1 percent in 2015.
  • Prices paid decreased 1.9 percent through the end of April 2015.
  • Prices are expected to decrease a total of 0.9 percent for all of 2015, indicating an expected increase in prices of 1.0 percent for the remainder of the year.
  • Manufacturing employment is expected to increase 0.7 percent during the remainder of 2015.
  • Manufacturing revenues are expected to increase 3.5 percent in 2015.
  • Overall, manufacturing is expected to maintain a positive growth trend in 2015.

Non-Manufacturing

  • Operating rate is currently 86 percent of normal capacity.
  • Production capacity is expected to increase 2.6 percent in 2015.
  • Capital expenditures are expected to increase 1.5 percent in 2015.
  • Prices paid increased 1 percent through the end of April 2015.
  • Prices were reported to have increased 1 percent in the first four months of the year and are expected to decrease 0.4 percentage point for the rest of the year for a total net annual increase of 0.6 percent.
  • Non-manufacturing employment is expected to increase 2 percent during the balance of 2015.
  • Non-manufacturing revenues are expected to increase 2.9 percent in 2015.
  • The non-manufacturing sector is projected to have continued growth in 2015.

Miscellaneous Manufacturing 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.

A more detailed look at the survey results is below.

Manufacturing Summary
Fifty-five percent of respondents from the panel of manufacturing supply management executives predict their revenues will be 9 percent greater in 2015 compared with 2014, 16 percent expect an 8.9 percent decline, and 29 percent foresee no change in revenue. This yields an overall average expectation of 3.5 percent revenue growth among manufacturers in 2015, which is a meaningful decrease of 2.1 percentage points from December 2014 when the panel predicted a 5.6 percent increase in 2015 revenues.

With operating capacity at 79.5 percent, an expected capital expenditure increase of 3.1 percent, prices paid for raw materials expected to decrease a 0.9 percentage point for all of 2015 compared with 2014, and employment expected to grow 0.7 percent for the balance of 2015, manufacturing is positioned to grow revenues while containing costs through the remainder of the year. "With 14 of the 18 industries within the manufacturing sector predicting revenue growth in 2015 when compared to 2014, U.S. manufacturing continues to move in a positive direction," said Bradley J. Holcomb, chairman of ISM’s Manufacturing Business Survey Committee.

The 14 industries reporting expectations of growth in revenue for 2015 — listed in order — are: Nonmetallic Mineral Products; Paper Products; Primary Metals; Furniture & Related Products; Machinery; Textile Mills; Food, Beverage & Tobacco Products; Fabricated Metal Products; Plastics & Rubber Products; Chemical Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Computer & Electronic Products; and Transportation Equipment.

Non-Manufacturing Summary
Fifty-four percent of non-manufacturing purchasing and supply executives expect their 2015 revenues to be greater by 8.9 percent than in 2014. Overall, respondents currently expect a 2.9 percent net increase in overall revenues, which is less than the 10 percent increase that was forecast in December 2014. "Non-manufacturing will continue to grow for the balance of 2015. Non-manufacturing companies continue to operate very efficiently as reflected by the high percentage of capacity utilization. Supply managers have indicated that overall costs have been minimally impacted with pricing projected to increase 0.6 percent over the year. Overall employment is projected to grow a modest 2 percent. Thirteen out of 18 industries are forecasting increased revenues which is less than the 17 industries that forecasted increased revenues last year.  Despite a cooling off in the rate of growth, the non-manufacturing sector will continue on the path of economic growth throughout the year," said Anthony S. Nieves, chairman of ISM’s Non-Manufacturing Business Survey Committee.

The 13 non-manufacturing industries expecting increases in revenue in 2015 — listed in order — are:  Retail Trade; Transportation & Warehousing; Wholesale Trade; Construction; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Information; Finance & Insurance; Accommodation & Food Services; Health Care & Social Assistance; Arts, Entertainment & Recreation; Public Administration; and Educational Services.

OPERATING RATE

Manufacturing
Purchasing and supply managers report that their companies are currently operating on average at 79.5 percent of normal capacity, representing a decrease from the 83.7 percent reported in December 2014, as well as a decrease from the 82.3 percent reported in April 2014. The 12 industries reporting operating capacity levels at or above the average capacity of 79.5 percent — listed in order — are: Wood Products; Paper Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Miscellaneous Manufacturing; Chemical Products; Printing & Related Support Activities; Fabricated Metal Products; Food, Beverage & Tobacco Products; Furniture & Related Products; and Primary Metals.

Non-Manufacturing
Non-manufacturing purchasing and supply executives report that their organizations are currently operating at 86 percent of normal capacity. This is 1.6 percent less than what was reported in December 2014 and less than the 86.3 percent reported in April 2014. The following nine industries operating at capacity levels above the average rate of 86 percent — listed in order — are:   Real Estate, Rental & Leasing; Educational Services; Information; Utilities; Agriculture, Forestry, Fishing & Hunting; Public Administration; Retail Trade; Health Care & Social Assistance; and Finance & Insurance.

Operating Rate
  Manufacturing Non-Manufacturing
  April 
2014

Dec

2014

April

2015

April

2014

Dec

2014

April

2015

90%+ 42% 49% 31% 57% 56% 53%
50%-89% 54% 48% 63% 41% 42% 46%
Below 50% 4% 3% 6% 2% 2% 1%
Est. Overall Average 82.3% 83.7% 79.5% 86.3% 87.6% 86.0%

PRODUCTION CAPACITY

Manufacturing
Production capacity in manufacturing is expected to increase 3.4 percent in 2015. This increase is less than the 5.6 percent increase predicted in December 2014 for 2015, and also less than the 5.3 percent increase reported in December for all of 2014. This nevertheless reflects the continuing strength in the sector as 42 percent of respondents expect an average capacity increase of 10.7 percent, 9 percent expect decreases averaging 13.5 percent, and 49 percent expect no change. The 13 industries expecting production capacity increases for 2015 — listed in order — are: Nonmetallic Mineral Products; Textile Mills; Transportation Equipment; Electrical Equipment, Appliances & Components; Furniture & Related Products; Paper Products; Food, Beverage & Tobacco Products; Chemical Products; Fabricated Metal Products; Machinery; Plastics & Rubber Products; Apparel, Leather & Allied Products; and Primary Metals.

Manufacturing Production Capacity
  For 2014 For 2015 For 2015
  Reported
Dec 2014
Magnitude of
Change

Predicted

Dec 2014

Magnitude of
Change

Predicted

April 2015

Magnitude of
Change
Higher 47% +12.7% 53% +11.6% 42% +10.7%
Same 48% NA 41% NA 49% NA
Lower 5% -15.0% 6% -10.3% 9% -13.5%
Net Average   +5.3%   +5.6%   +3.4%

Non-Manufacturing
The capacity to produce products or provide services in the non-manufacturing sector is expected to increase 2.6 percent during 2015. This compares to an increase of 3.6 percent reported for 2014 and a prediction inDecember 2014 for an increase of 4.3 percent for 2015. For 2015, 23 percent of non-manufacturing respondents expect their capacity to increase by an average of 14 percent, and 6 percent of the respondents foresee their capacity decreasing by an average of 11 percent. Seventy-one percent expect no change in their capacity. The nine industries expecting to add to their production capacity in 2015 — listed in order — are:   Accommodation & Food Services; Retail Trade; Finance & Insurance; Information; Public Administration; Wholesale Trade; Management of Companies & Support Services; Health Care & Social Assistance; and Other Services.

Non-Manufacturing Production or Provision Capacity
  For 2014 For 2015 For 2015
  Reported
Dec 2014
Magnitude of 
Change

Predicted

Dec 2014

Magnitude of
Change

Predicted

April 2015

Magnitude of 
Change
Higher 29% +12.9% 40% +11.1% 23% +14%
Same 70% NA 59% NA 71% NA
Lower 1% -5.0% 1% -12.5% 6% -11%
Net Average   +3.6%   +4.3%   +2.6%

PREDICTED CAPITAL EXPENDITURES — 2015 vs. 2014

Manufacturing
Survey respondents expect a 3.1 percent increase in capital expenditures in 2015. This is less than theDecember 2014 forecast when the panel predicted an increase of 3.7 percent for 2015. Currently, 29 percent of respondents predict increased capital expenditures in 2015, with an average increase of 31 percent, and the 20 percent who said their capital spending would decrease an average of 30.2 percent. Fifty-one percent say they will spend the same in 2015 as they did in 2014. The nine industries expecting increases in capital expenditures in 2015 compared to 2014 — listed in order — are: Nonmetallic Mineral Products; Transportation Equipment; Fabricated Metal Products; Primary Metals; Chemical Products; Food, Beverage & Tobacco Products; Paper Products; Miscellaneous Manufacturing; and Electrical Equipment, Appliances & Components.

Non-Manufacturing
Non-manufacturing purchasing and supply executives are expecting to increase their level of capital expenditures 1.5 percent in 2015 compared to 2014. The 34 percent of members expecting to spend more predict an average increase of 16.9 percent. Sixteen percent of respondents anticipate a decrease averaging 26.7 percent. Fifty percent of the respondents expect to spend the same on capital expenditures in 2015 as in 2014. The eight industries expecting an increase in capital expenditures in 2015 from 2014 — listed in order — are:  Accommodation & Food Services; Retail Trade; Professional, Scientific & Technical Services; Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; Wholesale Trade; Arts, Entertainment & Recreation; and Management of Companies & Support Services.

Predicted Capital Expenditures 2015 vs. 2014
  Manufacturing Non-Manufacturing
  Predicted
Dec 2014
Predicted
April 2015
Magnitude
of Change
Predicted
Dec 2014
Predicted
April 2015
Magnitude
of Change
Higher 35% 29% +31.0% 40% 34% +16.9%
Same 44% 51% NA 43% 50% NA
Lower 21% 20% -30.2% 17% 16% - 26.7%
Net Average +3.7%   +3.1% +3.8%   +1.5%

EMPLOYMENT

Change in Overall Employment – Balance 2015

Manufacturing
ISM's Manufacturing Business Survey respondents forecast that manufacturing employment will increase 0.7 percent during the balance of 2015, with 33 percent expecting employment to be 5.4 percent higher. Fifteen percent of respondents predict employment to be lower by 7.1 percent. The remaining 52 percent of respondents expect their employment levels to be unchanged for the remainder of 2015. The 11 industries reporting expectations of growth in employment during the year — listed in order — are: Nonmetallic Mineral Products; Textile Mills; Furniture & Related Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Chemical Products; Miscellaneous Manufacturing; Primary Metals; Machinery; and Computer & Electronic Products.

Non-Manufacturing
ISM's Non-Manufacturing Business Survey Committee respondents forecast that employment will increase 2 percent during the balance of 2015. For the remaining months of 2015, 33 percent expect employment to increase 7.6 percent, 9 percent anticipate employment to decrease by 6.1 percent, and 58 percent expect their employment levels to be unchanged. The 14 industries anticipating increases in employment in the remaining months of 2015 — listed in order — are:  Retail Trade; Finance & Insurance; Accommodation & Food Services; Professional, Scientific & Technical Services; Wholesale Trade; Construction; Health Care & Social Assistance; Public Administration; Management of Companies & Support Services; Other Services; Information; Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; and Agriculture, Forestry, Fishing & Hunting.

Predicted Change in Overall Employment
  Manufacturing Non-Manufacturing
  Predicted 
for 2015 
Dec 2014

Balance of 
2015

April 2015

Magnitude 
of Change
Predicted 
for 2015 
Dec 2014

Balance of 
2015

April 2015

Magnitude 
of Change
Higher 36% 33% +5.4% 38% 33% +7.6%
Same 49% 52% NA 50% 58% NA
Lower 15% 15% -7.1% 12% 9% -6.1%
Net Average +1.5%   +0.7% +1.7%   +2.0%
Diffusion Index 60.5% 59.0%   63.0% 62.0%  
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