Forecast predicts economic growth in manufacturing to continue through 2016

Economic growth in manufacturing is expected to continue in the U.S. throughout the remainder of 2016, according to the "Spring 2016 Semiannual Economic Forecast" from the Business Survey Committee of the Institute for Supply Management® (ISM®), Tempe, Ariz.

Fifty percent of respondents from the panel of manufacturing supply management executives predict their revenues will be 10.5 percent greater in 2016 compared to 2015, 18 percent expect a 14.2 percent decline, and 32 percent foresee no change in revenue. This yields an overall average forecast of 2.8 percent revenue growth among manufacturers for 2016. This current prediction is 1.3 percentage points lower than the December 2015 forecast of 4.1 percent revenue growth for 2016, but is 1.4 percent higher than the actual revenue growth reported for all of 2015.

With operating capacity at 81.7 percent, an expected capital expenditure increase of 1 percent, an increase of 0.6 percent for prices paid for raw materials, and employment expected to remain the same for the balance of 2016, manufacturing is positioned to grow revenues while containing costs through the remainder of the year.

Purchasing and supply managers report that their companies currently are operating on average at 81.7 percent of normal capacity, representing a slight increase from the 81.6 percent reported in December 2015, as well as an increase from the 79.5 percent reported in April 2015. Production capacity in manufacturing is expected to increase 3.0 percent in 2016. This increase is greater than the 2.8 percent increase predicted in December 2015 for 2016, and also greater than the 1.9 percent increase reported in December 2015 for all of 2015. This reflects the continuing strength in the sector, as 38 percent of respondents expect an average capacity increase of 10.9 percent, 7 percent expect decreases averaging 15.6 percent, and 55 percent expect no change.

Survey respondents expect a 1 percent increase in capital expenditures in 2016. This is the same increase as the panel predicted in the December 2015 forecast for 2016. Currently, 30 percent of respondents predict increased capital expenditures in 2016, with an average increase of 24.3 percent, and 21 percent said their capital spending would decrease an average of 29.2 percent. Forty-nine percent say they will spend the same in 2016 as they did in 2015.

ISM's Manufacturing Business Survey respondents forecast that manufacturing employment will remain at the current level on average through the end of 2016. Thirty-two percent of respondents expect employment to be 5.9 percent higher, while 20 percent of respondents predict employment to be lower by 9.9 percent. The remaining 48 percent of respondents expect their employment levels to be unchanged for the remainder of 2016.

Looking ahead, expectations are for increased revenues in manufacturing in 2016, as purchasing and supply management executives indicate an overall net increase of 2.8 percent in business revenues for 2016 over 2015. This is 1.3 percentage points lower than the 4.1 percent increase forecast in December 2015 for all of 2016, and 1.4 percentage points higher than the 1.4 percent increase reported for 2015 over 2014. Fifty percent of respondents say that revenues for 2016 will increase an average of 10.5 percent over 2015. Conversely, 18 percent say their revenues will decrease an average of 14.2 percent, and the remaining 32 percent indicate no change.