Manufacturing Growth Expected For 2006

Manufacturers expect to report higher revenues in 2006 than in 2005 but the rate of growth will be slower. In the 70th Semiannual Economic Forecast, released by the Institute of Supply Management (ISM) on Dec. 13, 75% of those surveyed expect a 5.4% net increase in 2006. This compares to a 7.3% increase in 2005. Industries that plan to see improvement include primary metals, electronic components and equipment, chemicals and transportation equipment.

"While 2005 has been a particularly strong year overall, it has presented challenges with regard to inflationary pressures on manufacturing costs. Respondents now expect those pressures to subside somewhat in 2006 based on their overall price forecast. Manufacturing has gained momentum in the past several months with significant strength in new orders and production and is in its 30th consecutive month of growth as reported in the monthly Manufacturing ISM Report On Business," says Norbert J. Ore, chair of the ISM Manufacturing Business Survey Committee.

Additional findings include:

  • Respondents report operating at 85.3% of their normal capacity, down from 86.8% reported in May 2005.
  • Reduced rate of increase of capital expenditures from 20% in 2005 to 9% in 2006.
  • Employment will grow by 1.3%.
  • Labor and benefit costs will increase by 2.7%.

In answer to a question concerning respondents' use of technology with regard to supply management, 80% consider themselves less that three-fourths complete in realizing efficiency from technology, while 46% report being less than fifty percent complete. Looking forward, ISM members plan to see supply chain improvements through the use of lean manufacturing concepts, use of improved enterprise technology, better forecasting and planning and use of improved inventory management.

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