ISM Survey Says Manufacturing Will Grow in 2008

Dec. 12, 2007
Companies are expecting a 6.8% net increase in overall revenues for 2008.

The Institute for Supply Management's (ISM) survey released on Dec. 12 reveals that the nation's purchasing and supply management executives see economic growth in the U.S. continuing in 2008.

Overall revenues are expected to increase 6.8% in 2008 compared to an increase of 2.4% reported for 2007.

"Manufacturing purchasing and supply executives are mostly optimistic about their organizations' prospects for the first half of 2008, and predict additional growth during the second half," said Norbert J. Ore, C.P.M., chair of the ISM Manufacturing Business Survey Committee. "While 2007 has been a good year overall, it has presented significant challenges with regard to energy costs and overall inflation in manufacturing input costs. Respondents expect cost pressures to subside somewhat in the second half of 2008 based on their overall price forecast. Manufacturing growth is now in its 10th consecutive month as measured by ISM. However, the trend is definitely toward slower growth."

Manufacturing industries expecting the greatest improvement over 2007 -- listed in order -- are: Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Miscellaneous Manufacturing(a); Fabricated Metal Products; Food, Beverage & Tobacco Products; Textile Mills; Paper Products; and Printing & Related Support Activities.

Companies report operating at 82.9% of their normal capacity, up from 82.8% reported in April 2007.

Capital expenditures will increase by a meager 0.7% in 2008, compared to an 18.2% increase reported for 2007.

Survey respondents also forecast that they will reduce inventories in an effort to decrease their purchased inventory-to-sales ratio in 2008.

Employment in the sector will grow by 1.6%, while labor and benefits costs are expected to increase an average of 2.5%.

Manufacturing purchasers are predicting strong growth in both exports and imports. 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 3.3% during the first four months of 2008, and will increase one percent during the balance of 2008, with an overall increase of 4.3% for 2008. Respondents' major concerns are: energy cost and supply; weak dollar; inflation; housing; and commodity prices.

A special question was asked to determine the progress of organizations in achieving efficiencies from the application of technology to supply management. Respondents believe they are only 51% complete on average in achieving benefits from technology in their supply chain, indicating there is still significant improvement to be gained from the application of technology in manufacturing.

Survey respondents expect to realize supply chain improvements through new or improved enterprise technology; improved inventory management; improved supplier management practices; supplier consolidation; and application of lean manufacturing concepts to supply chain.

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