Economy
ISM Report Lifts Expectations for 2021 Manufacturing Sector
Written by Sandy Williams
May 20, 2021
The manufacturing sector can expect continued growth for the remainder of this year, says the Institute for Supply Management in their Spring 2021 Semiannual Economic Forecast. ISM raised its projections for several components of the survey that covers 18 manufacturing industries.
“Expectations for the remainder for 2021 have strengthened somewhat compared to December 2020, as there is hope that the corner has been turned on the coronavirus (COVID-19) pandemic; both manufacturing and services sectors are signaling expansion,” said Timothy Fiore, chairman of the ISM Manufacturing Business Survey.
May 2021 operating capacity is at 88.3% of the normal rate and up from 76.9% a year ago. ISM predicts production capacity will increase 6.6% in 2021, up from the previous forecast of 5.3% and well over the marginal increase of 0.5% last year.
Revenue is expected to jump on average by 7.2%, a 0.3% increase from the prior forecast in December for a 6.9% gain in 2021. More than half (59%) of survey respondents said revenue for the year will increase, on average, 13.8% from 2020.
“It was not a bad manufacturing year in 2020, considering everything that (the sector) went through,” said Fiore during the ISM World 2021 Annual Conference. “So, a 7.2% revenue growth rate is a really good story, almost double the growth rate we thought we would see going into 2020. … Now, we’re looking at a strong year, and everything for 2022 looks positive as well.”
Survey respondents plan to invest more in their businesses this year. Capital spending is expected to jump 8.7% for 2021 compared to the 2.4% increase forecast in the December 2020 report.
In the December forecast, prices paid in the first four months of 2021 were expected to increase 2.5% but actually jumped 8.3% during the period. An average increase of 11.4% was reported by 74% of respondents. All 18 manufacturing industries expect prices will remain elevated with 74% expecting an 11.1% increase for the full year. ISM expects raw material prices to decrease about 0.2% during the remainder of the year for a projected net increase of 8.1% for 2021.
ISM forecasts a 2.8% increase in manufacturing employment during 2021. The industry was struggling with a labor shortage before the pandemic, which was exacerbated by COVID-19 restrictions last year.
Anthony Nieves, chairman of the ISM Services Business Survey Committee, noted that the labor pool has been restricted for years, citing in particular the shortage of skilled workers in the construction industry. Fiore echoed the concern adding that manufacturing’s employment projection is about “what [companies] can get, not what they need.”
The Institute of Supply Management Semi Annual Forecast includes survey responses from both the manufacturing and service sectors. Manufacturing includes the following industries: Food, Beverage & Tobacco Products; Textile Mills; Apparel, Leather & Allied Products; Wood Products; Paper Products; Printing & Related Support Activities; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Furniture & Related Products; and Miscellaneous Manufacturing.
Sandy Williams
Read more from Sandy WilliamsLatest in Economy
New York state manufacturing activity ramps up to multi-year high
New York state’s manufacturing sector saw substantial recovery in November, according to the latest Empire State Manufacturing Survey from the Federal Reserve Bank of New York.
CRU: Dollar and bond yields rise, metal prices fall as Trump wins election
Donald Trump has won the US presidential election. The Republican party has re-taken control of the Senate. Votes are still being counted in many tight congressional races. But based on results so far, the Republicans seem likely to maintain control of the House of Representatives. If confirmed, this will give Trump considerable scope to pass legislation pursuing his agenda. What this means for US policy is not immediately obvious. Trump will not be inaugurated until Jan. 20. In the coming weeks and months, he will begin to assemble his cabinet, which may give a clearer signal on his policy priorities and approaches. Based on statements he made during the presidential campaign, we have set out the likely direction of his economic policy here and green policy here.
ISM: Manufacturing index fell in Oct to lowest point of ’24
Domestic manufacturing contracted for the seventh straight month in October, according to the latest report from the Institute for Supply Management (ISM). This marks the 23rd time in the last 24 months that it has been in contraction.
Chicago Business Barometer slips in October
The Chicago Business Barometer fell to a five-month low in October and continues to indicate deteriorating business conditions, according to Market News International (MNI) and the Institute for Supply Management (ISM).
Final Thoughts
We all know the American news cycle moves pretty fast. Viral today, cached tomorrow. So it is with the US presidential election on Tuesday, Nov. 5. People have election fatigue. They've moved on to other things like planning holiday parties, debating Super Bowl hopefuls, or even starting to look forward to our Tampa Steel Conference in February.