Published on December 11, 2013

ISM survey: Businesses have positive outlook for '14

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Business

TEMPE, Ariz. (Dec. 11, 2013) — Supply managers for both the manufacturing and non-manufacturing sectors in the U.S. have a positive outlook for 2014, with expectations that business growth will be the same or better compared with 2013.

Economic growth in the U.S. will continue in 2014, according an economic forecast issued by the Business Survey Committee of the Institute for Supply Management (ISM). The report is compiled from survey responses of purchasing and supply executives across the country.

The manufacturing sector is optimistic about growth in 2014, with revenues expected to increase in 16 manufacturing industries, and the non-manufacturing sector predicts that 14 of its industries will see higher revenues.

Capital expenditures, which ISM noted as a major driver in the U.S. economy, are expected to increase by 8 percent in the manufacturing sector and by 4.6 percent in the non-manufacturing sector. Employment also is expected to grow—by 2.4 percent in the manufacturing sector and by 2.1 percent in non-manufacturing.

About 69 percent of survey respondents expect manufacturing revenues to be greater in 2014 than in 2013, with an overall 4.4 percent net increase in revenues for 2014, compared with a 4.6-percent jump reported for 2013 over 2012 revenues.

Among the 16 manufacturing industries expected to enjoy revenue improvement over 2014, the “plastics & rubber products” sector came in second behind textile mills.

“Manufacturing purchasing and supply executives expect to see continued growth in 2014. They are optimistic about their overall business prospects for the first half of 2014, and are even more optimistic about the second half of 2014,” said Bradley Holcomb, chair of the ISM Manufacturing Business Survey Committee.

“Manufacturing experienced six consecutive months of growth from June through November 2013, while experiencing only one month of contraction during the entire first 11 months of 2013, which occurred in May 2013 when the PMI registered 49 percent (as measured by and reported in the monthly Manufacturing ISM Report On Business).

“Our forecast calls for a continuation of growth in 2014, building on the momentum from the second half of 2013. Respondents expect raw materials pricing pressures in 2014 to be low, similar to levels experienced in 2013, and expect their margins will improve.”

Meanwhile, 58 percent of non-manufacturing supply management executives surveyed expect a 3.6-percent net increase in overall revenues for 2014 compared with a 4-percent growth reported for 2013 over 2012 revenues. Among the 14 non-manufacturing industries expecting revenue improvement in 2014 over 2013 were the retail trade and transportation and warehousing sectors.

“Non-manufacturing supply managers report operating at 86.3 percent of their normal capacity, higher than the 84.7 percent reported in April 2013. They are optimistic about continued growth in the first half of 2014 compared to the second half of 2013, and they have a higher level of optimism about the next 12 months than they had last December for 2013,” said Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee.

“They forecast that their capacity to produce products and provide services will rise by 1.9 percent during 2014, and capital expenditures will increase by 4.6 percent from the 2013 levels. Non-manufacturers also predict their employment will increase by 2.1 percent during 2014.”

Respondents expect the prices they pay for materials and services will increase by 1.9 percent during 2014 while overall labor and benefit costs will increase 2.6 percent.

Survey respondents reported that the most challenging problems facing their businesses are: domestic sales growth; government regulations; healthcare cost; healthcare reform uncertainty; ongoing government shutdown and debt ceiling concerns; inflation; international sales growth; and taxes.

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