Economic improvement in the United States will continue in 2024, according to purchasing and supply management executives polled for the December 2023 Semiannual Economic Forecast published by the Institute for Supply Management.
The polling results suggest that revenues will increase in 15 of 18 manufacturing industries and 16 of 18 services sector industries covered, with capital expenditures up 11.9% in the manufacturing sector after a 14.9% increase in 2023 and 2.9% in the services sector after a 4.2% ncrease in 2023.
The poll indicated employment will grow in 2024 by about 2% in manufacturing and 0.8% in services. After projected growth in manufacturing and a contraction in services in the first half of the year, growth in the second half should accelerate in manufacturing and strongly re-emerge in the services sector.
In the services sector, 43% of supply management executives expect their 2024 revenues to come in higher than in 2023. They expect a 6.9% net increase in overall revenues for 2024, versus the reported 4.2% increase in 2023. The 16 industries expecting revenue increases in 2024 are: Retail Trade; Professional, Scientific & Technical Services; Construction; Transportation & Warehousing; Management of Companies & Support Services; Wholesale Trade; Finance & Insurance; Public Administration; Mining; Accommodation & Food Services; Utilities; Health Care & Social Assistance; Arts, Entertainment & Recreation; Information; Other Services; and Educational Services.
“Services supply executives report operating at 86.5% of normal capacity, less than the 91% reported in May 2023,” said Anthony Nieves, chair of the ISM Services Business Survey Committee. “They are guarded about the first half of 2024, but expect robust growth in the second half, with a projected increase in capital reinvestment. They forecast that their capacity to produce products and provide services will rise by 4.1% during 2024, and capital expenditures will increase by 2.9 %. Services panel members also predict their overall employment will increase by 0.8% during 2024.”
Respondents in services industries expect the prices they pay for materials and services to increase by 3.4% during 2024. They also forecast their overall labor and benefit costs will increase 3.3%. Profit margins decreased slightly in the second and third quarters of 2023, but respondents expect growth between now and May 2024.
Looking ahead at the manufacturing sector in 2024, 58% of survey respondents expect revenue gains in 2024 versus 2023. Purchasing and supply executives polled expect a 5.6% net increase in overall revenues for 2024, compared to the 0.9-percent increase reported for 2023. The manufacturing industries likely to grown in the year ahead are Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Paper Products; Furniture & Related Products; Primary Metals; Miscellaneous Manufacturing; Transportation Equipment; Chemical Products; Textile Mills; Machinery; Fabricated Metal Products; Plastics & Rubber Products; Nonmetallic Mineral Products, and Petroleum & Coal Products.
“Manufacturing’s purchasing and supply executives expect to see overall growth in 2024,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee. “They are optimistic about overall business prospects for the first half of 2024 and more excited about faster growth in the second half. According to the ISM Report On Business, manufacturing grew for 28 consecutive months from June 2020 through September 2022, was unchanged in October, but dipped into contraction in November 2022, with the index remaining in contraction until now. Respondents expect raw materials pricing pressure to ease in 2024 and see H1 2024 profit margins improving over H2 2023. Wages and employment will continue to grow. Manufacturers also predict growth in both exports and imports in 2024.”
In the manufacturing sector, respondents reported companies are operating at 83% of normal capacity, up one percentage point from the 82% reported in May 2023. They predict that capital expenditures will increase year over year by 11.9% in 2024, compared to the 14.9% increase reported for 2023 over 2022. Manufacturers expect employment in the sector to grow by 2% in 2024 relative to December 2023 levels, while they anticipate that labor and benefit costs will increase an average of 5.2%. Respondents also expect the U.S. dollar to strengthen against the currencies of seven major trading partners during 2024. The executives predict prices paid for raw materials will increase 3.2% during the first five months of the year, with an overall increase of 3.3% in 2024. In 2023, raw material costs grew by 4.1% according to the ISM research.
