ISM Spring Semiannual Report points to a growth path for 2022

Like the preceding edition published in December, continued economic expansion through the balance of 2022 remains in the cards, according to the “Spring 2022 Semiannual Economic Forecast,” which was issued today by the Institute for Supply Management (ISM).

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

For manufacturing, ISM is estimating a 9.2% revenue gain, topping the 2022 estimate, from the December report, at 6.5%. The report stated that 63% of ISM respondents indicated that 2022 revenues will see an average annual revenue increase, of 15.5%, with 16 of the 18 manufacturing sectors tracked by ISM pegged for revenue growth. The report added that 7% of respondents expect a 2022 revenue decline, at 10% on average, with another 30% expecting revenues to be flat.

Manufacturing capital expenses (capex) are expected to see a 7.4% in 2022, in line with the December report’s 7.7% projection, with 32% of respondents expecting an average increase, of 33%, 11% expecting an average increase, of 27.3%, with 57% expecting no change. ISM said 12 manufacturing sectors are calling for capex gains. 

Manufacturing capacity utilization, or operating rate, came in at 87.2% or normal capacity, falling short of December’s 88.7 reading, its highest reading going back to 2016. Raw materials prices paid are pegged to increase 11.1%, for all of 2022, which translates into an expected 0.3% decline over the balance of the remainder of the year and topping December’s 8.1% tally, with prices paid up 11.4% through April. Manufacturing employment is expected to see a 3.2 increase in 2022, following a 1.0% December projection.

“With 16 manufacturing sector industries expecting revenue growth in 2022, and 13 industries expecting employment growth in 2022 panelists forecast that recovery will continue the rest of the year,” said Tim Fiore, Chair of the ISM Business Survey Committee, in the report. “Sentiment in each sector was generally consistent with industry performance reports in the April 2022 Manufacturing ISM Report On Business, as well as the fall Semiannual Economic Forecast conducted in December.”

Services outlook: ISM member panelists are calling for 2022 revenues to rise 4.9%, ahead of December’s 4.3% 2022 projection, and in line with 2021’s 4.8% increase. What’s more, all 18 services sectors contributing to the report are calling for 2022 revenue gains.

Services production capacity, or the capacity to produce products or provide services in this sector, is expected to see a 1.2% increase in 2022, trailing December’s 3.3% estimate, with 13 services sectors expecting growth, with the 2022 operating rate expected to hit 91% of normal capacity, a 1.6% increase over the December report.

Services capex are predicted to rise 6.2% annually, with 40% of ISM services respondents calling for capex to rise 19.7% on average, and 7% expecting a 22.2% decrease, and 52% calling for no change in capex levels.

Looking at raw materials prices, ISM services members expect a 9.6% average gain compared to the end of 2021, pointing to expectations of continued inflation, with prices paid through April up 8.7%. And employment is expected to see a 2.5% annual gain, with 12 services sectors anticipating gains.

“The services sector will continue to grow for the rest of 2022,” said Tony Nieves, Chair of ISM’s Services Business Survey Committee, in the report. “Services companies are currently operating at 91 percent of normal capacity. Supply managers indicate that prices are expected to increase 9.6 percent over the year, reflecting increasing inflation. Employment is projected to increase 2.5 percent. Each of the 18 industries forecast increased revenues, up from the 16 industries that predicted increases in December 2021.”