Purchasing Executives Predict 7.8% Manufacturing Revenue Growth

ByJohn S. McClenahen Both the manufacturing and non-manufacturing sectors of the U.S. economy will post net revenue growth better than 5% in the coming year, according to the latest economic forecast from the Institute for Supply Management, Tempe, Ariz. A panel of purchasing and supply executives expects a 7.8% net increase in overall revenues for manufacturers in 2005, half a percentage point below the 8.3% reported for this year. The metals industries (both primary and fabricated); instruments and photographic equipment; glass, stone and aggregates; transportation equipment; apparel; and electronics are among the industries expected to show the most year-to-year improvement. Among manufacturers, capital spending will rise 1.6% in 2005, and factories will run at 83% of capacity, the forecast suggests. Among non-manufacturing firms, a group that includes mining, business services, insurance, and finance and banking, revenue is expected to grow 5.9% in 2005, a half percentage point below the 6.4% reported for 2004. Capital spending is predicted to rise 1.8% in 2005, and capacity utilization is expected to be 88.2%. Meanwhile, the small business optimism index compiled by the National Federation of Independent Business (NFIB) rose nearly four points in November to tie a 30-year high of 107.7, reports the Washington, D.C.-based trade association. Compared with October levels, there was a 17% increase in those expecting the U.S. economy to be better in six months, a 13% increase in those expecting higher real sales during the next three months, and a 9% increase in those who believe now is a good time to expand. There was a 4% decline in those planning to increase capital spending, which, says NFIB chief economist William Dunkelberg, could indicate there's no year-end 2004 rush by small business owners to take advantage of expiring tax benefits.