The U.S. apparel and leather industry is surprisingly buoyant about its prospects for the rest of 2020, according to a new forecast issued by the Institute for Supply Management (ISM).
An ISM survey of purchasing and supply executives published in the “Spring 2020 Semiannual Economic Forecast” showed U.S. manufacturing, revenue, and capital expenditures and utilization are all expected to contract substantially this year due to the coronavirus pandemic.
Overall U.S. manufacturing revenue for 2020 is expected to decrease an average 10.3, which is 15.1 percent lower than the 4.8 percent increase forecast in December for all of 2020 and 12.2 percent lower than the 1.9 percent increase reported for 2019 over 2018. The economic impact of the pandemic is expected to cause capital expenditures to fall 19.1 percent, an expected decrease of 1.6 percent for prices paid for raw materials and employment decreasing 5.3 percent by the end of 2020.
“With 15 of the 18 manufacturing sector industries, including five of the six big industry sectors, predicting revenue declines for 2020, panelists forecast that recovery will likely not occur until near the end of the year,” said Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee, and Anthony S. Nieves, chair of the ISM Non-Manufacturing Business Survey Committee.
The two industries reporting expectations of growth in revenue for 2020 were apparel, leather and allied products, and food, beverage and tobacco products. The 15 manufacturing industries expecting decreases in revenue in 2020 included textile mills.
Related Stories
The upbeat outlook for the apparel and leather manufacturing sector stem from their ability to pivot manufacturing to personal protective equipment (PPE) when store stores were forced to close and ordered dwindles, and the potential for new core business now that retail is beginning to reopen.
In non-manufacturing, respondents expect a 10.4 percent net decrease in overall revenue, which is 13.8 percent less than the 3.4 percent increase that was forecasted in December. These include agriculture, transportation and warehousing, and retail trade.
“All 18 industries are forecasting decreased revenues, a dramatic reversal from 2019, when 17 of 18 industries projected increased revenues for the year,” Nieves said.
Purchasing and supply managers in manufacturing report their companies are currently operating, on average, at 75.9 percent of normal capacity—7.8 percent less than was reported in December. The eight industries reporting operating-capacity levels at or above the average rate of 75.9 percent included apparel, leather and allied products.
Production capacity in manufacturing is expected to decrease 3.6 percent in 2020. This compares to an increase of 3.1 percent reported for 2019, and a prediction in December for an increase of 3.3 percent for 2020. The five industries projecting production capacity increases for 2020 were led by apparel, leather and allied products. The 11 industries expecting production capacity decreases for 2020 included textile mills.
The capacity to produce products or provide services in the non-manufacturing sector is expected to decrease 2.8 percent during 2020. This compares to an increase of 2.5 percent reported for 2019, and a prediction in December for an increase of 3.6 percent for 2020.
The 14 industries expecting to decrease from their production capacity in 2020 included transportation and warehousing, wholesale trade, and retail trade.
Survey respondents expect a 19.1 percent decrease in capital expenditures in 2020. This is lower than the 2.1 percent decrease forecast by the panel in the December for 2020.
Apparel, leather and allied products were one of two industries expecting increases in capital expenditures in 2020 compared to 2019, while textile mills were among the 16 industries expecting a decrease.
Non-manufacturing purchasing and supply executives are looking for a 13.4 percent falloff of their capital expenditures in 2020 compared to 2019. This includes agriculture, retail trade, transportation and warehousing, and wholesale trade.
In the December forecast, respondents predicted an increase of 0.4 percent in prices paid during the first four months of 2020. They now report prices decreased 2.8 percent.
Four manufacturing industries reported an increase in prices paid for the first part of 2020, including textile mills. Among the 14 industries reporting a decrease in prices paid in the first part of 2020 were apparel, leather and allied products.
Non-manufacturing respondents report that their purchases in the first four months of this year cost an average of 4 percent more than at the end of 2019. This is 2.4 percent points higher than the 1.6 percent increase predicted in December for the first four months of 2020.
The eight industries reporting an increase in prices paid in the first part of 2020 included transportation and warehousing. Among the 10 industries reporting a decrease in prices paid in the first part of 2020 were agriculture, retail trade and wholesale trade.
Survey respondents expect a net average prices decrease of 1.6 percent for all of 2020, compared to the end of 2019. The seven industries predicting price increases for all of 2020 include textile mills, while among the 11 industries expecting price decreases were apparel, leather and allied products.
For 2020, non-manufacturing executives expect prices to increase, on average, 3.9 percent when compared to the prices at the end of 2019. The 11 industries predicting price increases for all of 2020 included wholesale trade, and transportation and warehousing, while among the seven industries expecting price decreases for 2020 were agriculture and retail trade.
Decreased revenue is expected this year, as purchasing and supply management executives predict an overall net decrease of 10.3 percent in manufacturing business revenue for 2020 over 2019. This is 15.1 percent lower than the 4.8 percent increase forecast in December.
Of the 18 manufacturing industries, the two that expect revenue growth for 2020 include apparel, leather and allied products. Among the 15 manufacturing industries projecting revenue contraction during 2020 were textile mills.
Non-manufacturing purchasing and supply management executives predicted an overall net decrease of 10.4 percent in sector business revenue for 2020 over 2019. This is 13.8 percentage points lower than the 3.4-percent increase forecast in December.
All 18 non-manufacturing industries expect revenue contraction for 2020, including agriculture, transportation and warehousing; retail trade and wholesale trade.