Manufacturing and non-manufacturing sectors poised for 2015 growth, says ISM semiannual report

Growth firmly remains in the cards for both the manufacturing and non-manufacturing sectors in 2015.

That was the main takeaway from the December 2014 Semiannual Economic Forecast from the Institute for Supply Management (ISM), which, in many ways, picked up where its companion Spring 2014 report published last April left off.

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

On the manufacturing side, the ISM said that revenue is expected to increase 5.6 percent this year (up from 5.3 percent in April), and capital expenditures are projected to be up 3.7 percent (down from 10.3 percent), and capacity utilization is now at 83.7 percent (up from 82.3 percent).

Manufacturing production capacity is expected to head up 5.6 percent in 2015, which is ahead of the 4.8 percent predicted in April. ISM said manufacturing production capacity saw a 5.3 percent gain in 2014, with 47 percent of respondents reporting an average capacity increase of 12.7 percent, followed by 5 percent reporting decreases averaging 15 percent, while 48 percent reported no change.

Manufacturing prices paid headed up 1.4 percent in 2014, with prices expected to head up 1.5 percent in 2015. As for employment, the report is calling for a 1.5 percent gain in 2015, and ISM said that 36 percent of its respondents maintain employment will be 7.1 percent higher in 2015 and another 15 percent think it will be down 6.7 percent.

Brad Holcomb, chair of the ISM Manufacturing Survey Business Committee, said that 2014 overall has been a great year for manufacturing, citing the most recent PMI for the month of November at 58.7 (50 or higher indicates growth) near a three-month high with 2015 expected to be even better.

“It has been a good solid year, and our panel is now forecasting 2015 to be even better, when you look at the revenue expectation of 5.6 percent compared to this year’s predicted result of 3.6 percent.

For non-manufacturing side, revenue is expected to rise 10 percent in 2015 (up from 2.7 percent in April), and capital expenditures are forecasted to rise 3.8 percent (down from 10.8 percent in April). Capacity utilization is pegged at 87.6 percent, which edges out April’s 86.3 percent.

Non-manufacturing production capacity, or the capacity to produce products or provide services in this sector, was up 3.6 percent in 2014, topping April’s 3.1 percent forecast, with a 4.3 percent gain expected in 2015.

And non-manufacturing employment is projected to rise 2.1 percent in 2015. Current non-manufacturing levels have headed up 1.3 percent since April and are expected to see a 1.7 percent gain by the end of 2015.

“Our supply managers are providing a positive outlook over all,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee. “This is a very robust report, with some areas showing substantial strength and others not so much. But in looking at in in the aggregate, things remain on the path of high efficiency, with a great operating rate and capacity utilization still increasing, and all the across the board we are seeing good increases, with the exception being maybe employment at a lower rate than we would like to see. Non-manufacturing remains on the path we have seen the last several months, having gone from slow incremental growth to really strong upward movement.”