ISM’s half-year economic forecast for the rest of 2021 is positive


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Consistent with its previous edition released in January, the Institute for Supply Management (ISM) Spring 2021 Semi-Annual Economic Forecast, which was released this week, continues to point to continued economic growth through the end of 2021.

The data in this report is based on feedback from U.S.-based purchasing and supply chain managers in the manufacturing and non-manufacturing sectors.

For manufacturing, the ISM estimates a revenue gain of 7.2% in 2021, exceeding the projection of 6.9% made in its previous report, which was released in December, and would exceed the decline by 8.5%. 1.3% annual by 2020. And 59% of respondents to the report’s manufacturing survey are calling for an increase in revenue every year in 2021, with all 18 manufacturing sectors tracked by the ISM being linked to revenue growth. Manufacturing has been on the rise since June 2020, and its March PMI, the reading used by the ISM to measure growth, reached its highest level since November 1983.

Manufacturing capital spending (capex) is expected to grow 8.7% annually, well ahead of December’s 2.4% projection, with the 27% of report respondents indicating that capital spending will increase in 2021, indicating an expected average increase of 46%, with 16% saying their investments would decrease by an average of 23.9% and 57% expecting no change.

Manufacturing capacity utilization, or operating rate, which was 88.3% of normal capacity [its highest reading since 2016], is 2.6% above December’s reading of 85.7%, with production capacity expected to increase by 5.3%, matching the January’s 5.3% reading and well before annual increase of 0.5% in 2020. Commodity prices are expected to increase by 8.1% in 2021, ahead of December’s 2.9% projection, indicating a decline of 0.2% from remainder of 2021. Manufacturing employment is expected to rise 2.8% this year, which is in line with December’s 2.8. % estimate.

“It’s a great report, there’s no question about it,” said Tim Fiore, chairman of the ISM Manufacturing Company Inquiry Committee. “Optimism is better in May than it was in December 2020, in terms of projections for growth and the pace of change. Income and capital spending were very strong, as was capacity utilization, which was offset by price increases and the inability to hire labor. After the pandemic, we thought we would see a 10% drop in revenue in 2020, but we ended up with a 1.3% drop, and now we have a 7.2% revenue gain forecast for 2021. “

Service revenue is expected to grow 5.4% in 2021, beating the previous estimate of 1.6%. The production capacity of services, or the ability to produce products or provide services in this sector, is expected to increase by 2.3% in 2021, down from the forecast of 3.2% in December. And investment in services is now expected to rise 5.7% for the year, down from the forecast increase of 12.7% in December. Prices paid for raw materials in the services sector are expected to rise 4.9% for 2021 as a whole, holding steady for the rest of the year, ahead of December’s estimate of 3.5% .

The capacity utilization rate in the service sector, or operating rate, now stands at 89.4%, compared to 86.6% in December.

“In the last report, we saw all the numbers down from what we saw before the pandemic started,” said Tony Nieves, chair of the ISM’s non-manufacturing business committee. . “We’ve had capacity issues and also had employment issues before the pandemic, during the pandemic, and now on the recovery side, and not having the right labor pool, not having the right labor pool. applicable labor force, as well as supply and demand issues. ”

The service revenue figures were described as very good by Nieves as they are generally closer to the 2% range, while capital spending was not as strong as in the past but was still considered solid. And the capacity utilization rate of 89.4% was high, he added, even with people working remotely.

“Overall, looking at the service sector, this report presents a good picture and reflects a strong recovery to come,” he said.

About the Author

Jeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics management, Modern material handling, and Supply chain management review. Jeff works and lives in Cape Elizabeth, Maine where he covers all aspects of the supply chain, logistics, freight transportation and material handling industries on a daily basis. Contact Jeff Berman

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