Economic growth continues in 2015, says forecast

Economic growth in the U.S. will continue in 2015, according to projections in a semiannual economic forecast issued by the Business Survey Committee of the Institute for Supply Management® (ISM). In the forecast, purchasing and supply management executives share their expectations for a continuation of the economic recovery that began in mid-2009.

The manufacturing sector is optimistic about growth in 2015, with revenues expected to increase in 15 manufacturing industries. Capital expenditures, a major driver in the U.S. economy, are expected to increase by 3.7 percent. The sector expects that its employment base will grow by 1.5 percent.

Expectations for 2015 are positive, as 67 percent of survey respondents expect revenues to be greater in 2015 than in 2014. The executives surveyed expect a 5.6 percent net increase in overall revenues for 2015, compared to a 3.6 percent increase reported for 2014 over 2013 revenues. The 15 manufacturing industries expecting revenue improvement in 2015 over 2014, listed in order, are:

1. Food, beverage, and tobacco products.
2. Furniture and related products.
3. Computer and electronic products.
4. Fabricated metal products.
5. Miscellaneous manufacturing.
6. Machinery.
7. Nonmetallic mineral products.
8. Printing and related support activities.
9. Paper products.
10. Chemical products.
11. Transportation equipment.
12. Textile mills.
13. Primary metals.
14. Plastics and rubber products.
15. Electrical equipment, appliances, and components.

"Manufacturing purchasing and supply executives expect to see continued growth in 2015. They are optimistic about their overall business prospects for the first half of 2015, and are similarly optimistic about the second half of 2015," said Bradley J. Holcomb, CPSM, CPSD, and chair of the ISM Manufacturing Business Survey Committee. "Manufacturing experienced 18 consecutive months of growth from June 2013 through November 2014, as reported in the monthly Manufacturing ISM Report On Business®, and our forecast calls for a continuation of growth in 2015, building on the momentum reported in 2014. Respondents expect raw materials pricing pressures in 2015 to be low, similar to levels experienced in 2014, and expect their margins will improve in 2015. Manufacturers are also predicting growth in both exports and imports in 2015 over 2014."

In the manufacturing sector, respondents report operating at 83.7 percent of their normal capacity, up 1.4 percentage points from the 82.3 percent reported in April 2014. Purchasing and supply executives predict that capital expenditures will increase by 3.7 percent in 2015 over 2014, compared to a 14.7 percent increase reported for 2014 over 2013. Manufacturers have an expectation that employment in the sector will increase by 1.5 percent in 2015, while labor and benefit costs are expected to increase an average of 3.2 percent. Respondents also expect the U.S. dollar to strengthen against all seven currencies of major trading partners in 2015.

The panel also predicts the prices paid for raw materials will increase 1.2 percent during the first four months of 2015 and will increase an additional 0.3 percent during the balance of the year, with an overall increase of 1.5 percent for 2015. This compares to a reported 1.4 percent increase in raw materials prices for 2014 compared with 2013.

Regarding a question about unfilled job openings, the top three responses from the manufacturing panel were:

1. Currently have a typical number of unfilled job openings - 39.5%
2. Cannot find enough qualified applicants to fill job openings - 28.8%
3. Hiring less than usual due to economic uncertainty - 18.6%

When asked if they planned to reshore significant volumes of manufacturing and business processes in 2015, 10.4 percent of respondents said yes, 58.8 percent said no, and 30.8 percent said the question was not applicable to their business. Of the respondents who said no, 53.7 percent indicated that the cost advantage of offshoring is still too favorable for them to reshore.