The Institute for Supply Management’s (ISM) Spring 2019 Semiannual Economic Forecast paints a bright landscape for U.S. manufacturers, even as raw materials prices increase due in part to higher tariffs on a range of goods.
The survey of U.S. purchasing and supply executives from 17 industrial sectors, including apparel, leather goods and textile mills, said production capacity is expected to increase 4.5 percent in 2019, with capital expenditures rising 5.9 percent. Among respondents to the panel of manufacturing supply management executives, 55 percent predicted their revenues will be 4 percent higher on average in 2019 compared to 2018.
With operating rates at 84.2 percent, an expected capital expenditure increase of 5.9 percent, an increase of 1.5 percent for prices paid for raw materials and employment expected to increase by 2 percent by the end of 2019, manufacturing is positioned to grow revenues while managing costs through the remainder of the year, ISM said.
“U.S. manufacturing continues to move in a positive direction,” Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee, said. “However, finding and onboarding qualified labor and being able to pass on raw material price increases will ultimately define manufacturing revenues and profitability.”
Textile mills were among the sectors planning an increase in production capacity, as 37 percent of respondents expect an average capacity increase of 13.8 percent, 6 percent expect decreases averaging 9.9 percent, and 57 percent expect no change.
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With an average increase of 29.3 percent, textile, apparel and leather goods firms were included in the 32 percent of respondents predicting increased capital expenditures in 2018, while 12 percent said their capital spending would decrease an average of 27.7 percent.
In a December 2018 forecast, respondents predicted an increase of 3.5 percent in prices paid during the first four months of 2019, but they now report prices increased by 1.5 percent. The 45 percent who said their prices are higher now than at the end of 2018 report, including apparel, textile and leather goods manufacturers, reported an average increase of 4.9 percent, while the 13 percent who report lower prices report an average decrease of 5 percent.
When asked to predict 2019 price changes, 44 percent of respondents, including apparel, textile and leather goods executives, expect prices to increase 4.8 percent for the full year of 2019 compared to the end of 2018. Meanwhile, 17 percent anticipate decreases averaging 4 percent. Including the 39 percent who expect no change in prices, survey respondents expect a net average price increase of 1.5 percent for all of 2019.
Asked if tariffs such as those imposed on Chinese imports, have raised the price of the goods produced and delivered to customers, 59.1 percent said yes.