Manufacturing Growth Expected in 2010 Says Industry Group

ISM predicts capital expenditures will decrease 4%

U.S. economic growth will resume in 2010, according to the Institute for Supply Management. Expectations for 2010 are for the positive conditions experienced in the second half of 2009 to continue in manufacturing, while the non-manufacturing sector foresees marginal growth.

However, business investment, a major driver in the U.S. economy, will decline as both sectors expect a combined average of a 5.4% in capital spending.

Expectations are positive as 60% of survey respondents expect revenues to be greater in 2010 than in 2009. The panel of purchasing and supply executives expects a 5.7% net increase in overall revenues for 2010, compared to a 10.7% decrease reported for 2009.

Respondents report operating at 70.1% of their normal capacity, up from 67% reported in April 2009. Capital expenditures will decrease by 4% in 2010, compared to a 7.8% decrease reported for 2009. Companies will reduce inventories in an effort to improve their purchased inventory-to-sales ratio in 2010.

Manufacturers have an expectation that employment in the sector will increase by 1.5%, while labor and benefits costs are expected to increase an average of 1.4% in 2010.

Manufacturing purchasers are predicting strength in exports and imports in 2010. They also expect the U.S. dollar to weaken on average against the currencies of major trading partners.

The panel also predicts the prices they pay will increase 0.2% during the first four months of 2010, and will increase an additional 2.4% during the balance of 2010, with an overall increase of 2.6% for 2010.

Respondents' major concerns are: weak economy; credit crisis; taxes; interest rates; and high energy costs. Survey respondents expect to realize supply chain improvements through supplier consolidation; new or improved enterprise technology and system utilization; improved inventory/asset management; lean manufacturing; and cost reduction.

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