ISM semiannual Report Paints Rosy View for 2017

Supported by decent growth trends in recent months, the December 2016 Semiannual Economic Forecast recently issued by the Institute for Supply Management (ISM) makes it clear that the future looks fairly bright for both the manufacturing and non-manufacturing sectors.

Data for these reports is based on feedback from U.S.-based purchasing and supply chain executives in manufacturing and non-manufacturing sectors.

For manufacturing, ISM data pointed to revenue heading up 4.6 percent in 2017, which is ahead of a 2.8 percent estimate made in May in the previous edition of the report and a 0.6 percent gain for 2016 compared to 2015. And it noted that 67 percent of survey respondents expect 2017 revenues to be higher than 2016.

What's more, 16 of the 18 reporting manufacturing sectors maintain revenue growth is in the cards for first half of 2017. Capital expenditures are pegged to increase 0.2 percent, trending below May's estimate of a 1.0 percent gain, and capacity utilization is expected to be up slightly at 81.9 percent, compared to May's 81.7 percent.

Manufacturing production capacity is expected to rise 2.5 percent in the first half of 2017, which is in line with the previous report's estimate of 3.0 percent.

Prices paid by ISM manufacturing respondents were off 0.4 percent in 2016 compared to 2015 and are expected to rise 0.9 percent through the first four months of 2017, followed by an additional 0.4 percent gain through the remainder of 2017 for an overall 1.3 percent uptick. And for employment ISM expects a 0.6 percent gain, which is above a May estimate of 0.2 percent. Capital expenditures are pegged to rise 0.2 percent in 2017, coming off of a 7.3 percent 2016 increase.

“The expected 2017 revenue gain of 4.6 percent is a healthy number relative to the 0.9 percent gain for 2016 and serves as a positive indicator for 2017 expectations,” said Brad Holcomb, chair of the ISM's Manufacturing Business Survey Committee. “While the employment estimate may appear to be low, there are high levels of employment within manufacturing and nationally so we would not expect in any case to have a much stronger number, with labor and benefits expected to rise 2.5 percent for manufacturing in 2017.”

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