ISM: Economic Improvement Continues in 2023

From the Institute of Supply Management

Economic improvement in the U.S. will continue in 2023, say the nation’s purchasing and supply management executives in the December 2022 Semiannual Economic Forecast, the Institute for Supply Management reported.

Revenues are expected to increase in 15 of 18 manufacturing industries and 14 of 18 services-sector industries. Capital expenditures are expected to increase by 2.6% in the manufacturing sector (after a 12% increase in 2022) and increase by 2.8% in the services sector (after a 6% increase in 2022). The manufacturing employment base is expected to grow by 3.9%, and the services employment base is expected to increase by 1% in 2023. Compared to the first half, growth in the second half of the year is projected to rebound in manufacturing and accelerate in services.

These projections are part of the forecast issued by the Business Survey Committees of Institute for Supply Management.

Manufacturing summary

Expectations for 2023 are positive, as 45% of survey respondents expect revenues to be greater in 2023 than in 2022. The panel of purchasing and supply executives expects a 5.5% net increase in overall revenues for 2023, compared to a 9.3% increase reported for 2022. Fifteen of the 18 manufacturing industries expect revenue improvement in 2023.

In the manufacturing sector, respondents report operating at 88.4% of normal capacity, up 0.8 percentage point from the 87.2% reported in May 2022. Purchasing and supply executives predict that capital expenditures will increase year-over-year by 2.6% in 2023, compared to the 12% increase reported for 2022 compared to 2021. Manufacturers expect employment in the sector to grow by 3.9% in 2023 relative to December 2022 levels, while labor and benefit costs are expected to increase an average of 5.8%. Respondents also expect the U.S. dollar to strengthen against the currencies of seven major trading partners in 2023.

The panel predicts that prices paid for raw materials will increase 2.5 percent during the first five months of the year, with an overall increase of 2 percent for 2023. This compares to a reported 11.4% increase in raw materials prices between the end of 2021 and 2022.

Operating rate and production capacity

Manufacturing purchasing and supply executives report their companies are currently operating at 88.4% of normal capacity. This is a 1.2 percentage point increase when compared to May 2022 (87.2%) and a decrease when compared to December 2021 (88.7%).

Production capacity in manufacturing increased 6.7% in 2022, as 49% of purchasing and supply executives reported an average capacity increase of 15.4%, 7% reported an average decrease of 12.4%, and 44% reported no change. This compares to a May 2022 predicted increase in production capacity of 5.8% for 2022. Expectations for 2023 are for an increase of 5.3%.

For more information, visit www.ismworld.org/.