Economic growth in the United States will continue in 2019, say the nation’s purchasing and supply management executives in the December 2018 Semiannual Economic Forecast.
Expectations are for a continuation of the growth that began in mid-2009. The manufacturing sector is optimistic about growth in 2019, with revenues expected to increase in 17 manufacturing industries, and the non-manufacturing sector also indicates that 17 of its industries will see higher revenues.
Capital spending, a major driver in the U.S. economy, are expected to increase by 6% in the manufacturing sector and 3.4% in the non-manufacturing sector. Manufacturing expects that its employment base will grow by 2.4%, while non-manufacturing expects employment growth of 2%.
Manufacturing Summary
Expectations for 2019 are positive, as 64% of survey respondents expect revenues to be greater in 2019 than in 2018. The panel of purchasing and supply executives expects a 5.7% net increase in overall revenues for 2019, compared to a 5.1% increase predicted for 2018 over 2017 revenues.
“Manufacturing purchasing and supply executives expect to see growth in 2019. They are optimistic about their overall business prospects for the first half of 2019, with business continuing to expand through the second half of 2019,” says Timothy R. Fiore, chair of the Institute for Supply Management‘s Business Survey Committee.
“In 2018, manufacturing experienced 12 straight months of growth from December 2017 through November 2018, resulting in an average PMI of 59.2 %, as compared to 57 % for the 12 months ending November 2017, as reported in the monthly Manufacturing ISM Report On Business. Respondents expect raw materials pricing pressures in 2019 to increase, and expect their profit margins will improve in 2019 over 2018. Manufacturers are also predicting growth in both exports and imports in 2019.”
In the manufacturing sector, respondents report operating at 85.2% of their normal capacity, down 0.6 percentage point from the 85.8% reported in May 2018. Purchasing and supply executives predict that capital expenditures will increase by 6% in 2019 over 2018, compared to the 13.4% increase reported for 2018 over 2017.
Manufacturers have an expectation that employment in the sector will grow by 2.4% in 2019 relative to December 2018 levels, while labor and benefit costs are expected to increase an average of 2.5% in 2019. 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.
The panel predicts the prices paid for raw materials will increase by 3.5% during the first five months of 2019, with an overall increase of 3.3% for 2019. This compares to a reported 2% increase in raw materials prices for 2018 compared with 2017.
Non-Manufacturing Summary
Fifty-seven % of non-manufacturing supply management executives expect their 2019 revenues to be greater than in 2018. They currently expect a 3.7% net increase in overall revenues for 2019 compared to a 4. % increase reported for 2018 over 2017 revenues.
“Non-manufacturing supply managers report operating at 88.4% of their normal capacity, higher than the 85.5% reported in May 2018. They are optimistic about continued growth in the first half of 2019 compared to the second half of 2018, with a projected increase in growth rate for capital reinvestment,” says Nieves. “They forecast that their capacity to produce products and provide services will rise by 2.9% during 2019, and capital expenditures will increase by 3.4% from 2018 levels. Non-manufacturers also predict their employment will increase by 2% during 2019.”
Respondents in non-manufacturing industries expect the prices they pay for materials and services will increase by 3.6% during 2019. They also forecast that their overall labor and benefit costs will increase 3.2% in 2019. Profit margins are reported to have increased in the second and third quarters of 2018, and respondents expect them to increase between now and May 2019.