Purchasing and supply management executives expect gradual economic improvement in the United States in 2023, according to the Institute for Supply Management December 2022 Semiannual Economic Forecast, with retail among the sectors expecting gains.
The study underlying the report pointed to revenues increasing in 15 of 18 manufacturing industries reviewed by ISM and 14 of 18 services sector industries. Year over year, study participants anticipated a 2.6% increase in manufacturing sector capital expenditures in 2023 after a 12% increase in 2022 and a 2.8% services sector capital expenditure increase after a 6% increase in 2022. The manufacturing employment base should grow by 3.9%, the study indicated, and the services employment base should grow by 1% in 2023.
After softer results in the first half, growth in the second half of the year should rebound in manufacturing and accelerate in services, the study suggested.
For the manufacturing sector, 45% of survey respondents said they expected revenues to gain in 2023 versus 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. Then, 15 of the 18 manufacturing industries expect revenue improvement in 2023; listed in order of largest to smallest projected increase: Plastics & Rubber Products; Transportation Equipment; Apparel, Leather & Allied Products; Fabricated Metal Products; Primary Metals; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Furniture & Related Products; Machinery; Chemical Products; Computer & Electronic Products; Miscellaneous Manufacturing; Paper Products; Electrical Equipment, Appliances & Components; and Textile Mills.
Respondents reported that they have been operating at 88.4% of normal capacity, up 0.8 percentage points from the 87.2% reported in May 2022. Manufacturers expect sector employment to grow by 3.9% in 2023 relative to December 2022 levels, while labor and benefit costs should increase by an average of 5.8%. Respondents also expect the U.S. dollar to strengthen versus the currencies of seven major trading partners in 2023. Respondents predict that prices paid for raw materials would increase 2.5% during the first five months of the year, with an overall increase of 2% for 2023 as compared to an 11.4% year-over-year increase in raw materials prices in 2022.
“Manufacturing’s purchasing and supply executives expect to see overall growth in 2023. They are pessimistic about overall business prospects for the first half of 2023 but project growth returning in the second half. According to the ISM Report On Business, manufacturing grew for 29 consecutive months from June 2020 through October 2022 but dipped into contraction in November after declining in five out of the previous six months. Respondents expect raw materials pricing pressure to increase in 2023, but still see first-half 2023 profit margins improving over the second half of 2022. Wages and employment will continue to grow. Manufacturers also predict growth in both exports and imports in 2023,” says Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee.
On the service side, half of services supply management executives expect their 2023 revenues to gain versus 2023. They anticipate a 3.1% net increase in overall revenues for 2023 compared to a 2.1% increase reported for 2022. The 14 industries expecting revenue increases in 2023, listed in order of largest to smallest projected increase, are: Transportation & Warehousing; Mining; Professional, Scientific & Technical Services; Management of Companies & Support Services; Accommodation & Food Services; Real Estate, Rental & Leasing; Retail Trade; Utilities; Construction; Public Administration; Information; Finance & Insurance; Educational Services; and Other Services.
Respondents in services industries expect the prices they pay for materials and services to advance by 8.4% during 2023. They anticipate that their overall labor and benefit costs will increase by 3.5%. The second and third quarters of 2022 experienced profit margin decreases and respondents expect margins will decline between now and May 2023.
“Services supply executives report operating at 89.9 % of normal capacity, slightly less than the 91% reported in May 2022. They are optimistic about continued growth in the first half of 2023 and expect more growth in the second half, with a projected increase in the growth rate for capital reinvestment. They forecast that their capacity to produce products and provide services will rise by 3.4% during 2023, and capital expenditures will increase by 2.8%. Services panel members also predict their overall employment will increase by 1% during 2023,” said Anthony Nieves, chair of the ISM Services Business Survey Committee.
