Fall 2019 Semi-Annual Economic Forecast

Economic Growth Continues In 2020

Manufacturing Growth Expected in 2020
Revenue to Increase 4.8%
Capital Expenditures to Decrease 2.1%
Capacity Utilization Currently at 83.7%

Non-Manufacturing Growth Projected in 2020
Revenue to Increase 3.4%
Capital Expenditures to Increase 1.3%
Capacity Utilization Currently at 86.0%

(Tempe, Arizona) — Economic growth in the United States will continue in 2020, say the nation’s purchasing and supply management executives in the December 2019 Semiannual Economic Forecast. Expectations are for a continuation of the growth that began in mid-2009, as indicated in the monthly ISM® Report On Business®. The manufacturing sector is optimistic about growth in 2020, with revenues expected to increase in all 18 manufacturing industries, and the non-manufacturing sector also indicates that 17 of its industries will see higher revenues. Capital expenditures are expected to decrease by 2.1 percent in the manufacturing sector (after 6.4-percent growth in 2019) and increase by 3.4 percent in the non-manufacturing sector. Manufacturing expects that its employment base will grow slightly, by 0.1 percent, while the outlook for the next 12 months is predominately growth oriented.

These projections are part of the forecast issued by the Business Survey Committee of Institute for Supply Management® (ISM®). The forecast was released today by Timothy R. Fiore, CPSM, C.P.M, Chair of the ISM Manufacturing Business Survey Committee, and by Anthony S. Nieves, CPSM, C.P.M., A.P.P, CFPM, Chair of the ISM Non-Manufacturing Business Survey Committee.

Manufacturing Summary


Expectations for 2020 are positive, as 58 percent of survey respondents expect revenues to be greater in 2020 than in 2019. The panel of purchasing and supply executives expects a 4.8-percent net increase in overall revenues for 2020, compared to a 1.9-percent increase predicted for 2019 over 2018 revenues. All 18 manufacturing industries expect revenue improvement in 2020 over 2019, listed in order: Fabricated Metal Products; Food, Beverage & Tobacco Products; Apparel, Leather & Allied Products; Paper Products; Furniture & Related Products; Chemical Products; Wood Products; Computer & Electronic Products; Miscellaneous Manufacturing; Machinery; Transportation Equipment; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Primary Metals; Printing & Related Support Activities; Textile Mills; Petroleum & Coal Products; and Nonmetallic Mineral Products.

“Manufacturing purchasing and supply executives expect to see growth in 2020. They are optimistic about their overall business prospects for the first half of 2020, with business continuing to expand through the second half of 2020. Manufacturing experienced eight consecutive months of growth from December 2018 through July 2019. However, manufacturing contracted during the period from August 2019 through November 2019. This resulted in an average PMI® of 51.8 percent, as compared to 59.2 percent for the 12 months ending November 2018, as reported in the monthly Manufacturing ISM® Report On Business®. Respondents expect raw materials pricing pressures in 2020 to increase and expect profit margins to improve in 2020 over 2019. Manufacturers are also predicting growth in both exports and imports in 2020,” says Fiore.

In the manufacturing sector, respondents report operating at 83.7 percent of their normal capacity, down 0.5 percentage point from the 84.2 percent reported in May 2019. Purchasing and supply executives predict that capital expenditures will decrease by 2.1 percent in 2020 over 2019, compared to the 6.4-percent increase reported for 2019 over 2018. Manufacturers expect employment in the sector to grow by 0.1 percent in 2020 relative to December 2019 levels, while labor and benefit costs are expected to increase an average of 0.7 percent in 2020. Respondents also expect the U.S. dollar to strengthen against all seven currencies of major trading partners in 2020, as was the case in 2019.

The panel predicts the prices paid for raw materials will increase by 0.4 percent during the first five months of 2020, with an overall increase of 1.1 percent for 2020. This compares to a reported 0.7 percent increase in raw materials prices for 2019 compared with 2018.

Special questions were asked of our manufacturing panel. See end of report.

Non-Manufacturing Summary


Fifty percent of non-manufacturing supply management executives expect their 2020 revenues to be greater than in 2019. They expect a 3.4-percent net increase in overall revenues for 2020 compared to a 4.4-percent increase reported for 2019 over 2018 revenues. The 17 industries expecting increases in revenues in 2020 — listed in order of percentage increase — are: Management of Companies & Support Services; Mining; Professional, Scientific & Technical Services; Wholesale Trade; Arts, Entertainment & Recreation; Other Services; Health Care & Social Assistance; Educational Services; Utilities; Information; Accommodation & Food Services; Retail Trade; Finance & Insurance; Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; and Public Administration.

“Non-manufacturing supply managers report operating at 86 percent of their normal capacity, lower than the 89 percent reported in May 2019. They are optimistic about continued growth in the first half of 2020 compared to the second half of 2019, with a projected decrease in growth rate for capital reinvestment. They forecast that their capacity to produce products and provide services will rise by 3.6 percent during 2020, and capital expenditures will increase by 1.3 percent from 2019 levels. Non-manufacturers also predict their employment will increase by 1.2 percent during 2020,” says Nieves.

Respondents in non-manufacturing industries expect the prices they pay for materials and services to increase by 1.9 percent during 2020. They also forecast that their overall labor and benefit costs will increase 1.8 percent. Profit margins are reported to have decreased in the second and third quarters of 2019, and respondents expect them to increase between now and May 2020.

Special questions were asked of our non-manufacturing panel. See end of report.

OPERATING RATE

Manufacturing


Manufacturing purchasing and supply executives report their companies are currently operating at 83.7 percent of normal capacity. This is a 0.5-percentage point decrease when compared to May 2019 (84.2 percent), and a decrease when compared to December 2018 (85.2 percent). The following 10 industries — listed in order — are operating at or above the average rate of 83.7 percent: Wood Products; Paper Products; Petroleum & Coal Products; Apparel, Leather & Allied Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Machinery; Transportation Equipment; and Chemical Products.

Non-Manufacturing


Non-manufacturing supply executives report their organizations are currently operating at 86 percent of normal capacity. This is lower than the 89 percent reported in May 2019, and lower than the 88.4 percent reported in December 2018. Considering the production capacity increases reported in the following section of this forecast, this indicates that non-manufacturing industries are continuing to add capacity, but also find it necessary to maintain their capacity utilization at a relatively high level. The 10 industries operating at or above the average capacity level of 86 percent — listed in order — are: Real Estate, Rental & Leasing; Transportation & Warehousing; Other Services; Finance & Insurance; Professional, Scientific & Technical Services; Educational Services; Health Care & Social Assistance; Retail Trade; Management of Companies & Support Services; and Public Administration.

Operating Rate
Something Manufacturing Non-Manufacturing
  Dec
2018
May
2019
Dec
2019
Dec
2018
May
2019
Dec
2019
90%+ 57% 43% 40% 65% 62% 51%
50% - 89% 43% 56% 58% 33% 37% 48%
Below 50% 0% 1% 2% 2% 1% 1%
Est. Overall Average 85.2% 84.2% 83.7% 88.4% 89.0% 86.0%

PRODUCTION CAPACITY

Manufacturing


Production capacity in manufacturing increased 3.1 percent in 2019, as 39 percent of purchasing and supply executives reported an average capacity increase of 11 percent, 11 percent reported an average decrease of 10.5 percent, and 50 percent reported no change. This compares to a predicted increase in production capacity of 4.5 percent for 2019 made in May 2019. Expectations for 2020 are for an increase of 3.3 percent. The 12 industries that report achieving an increase in production capacity in 2019 — listed in order — are: Wood Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Petroleum & Coal Products; Chemical Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Transportation Equipment; Fabricated Metal Products; Nonmetallic Mineral Products; Plastics & Rubber Products; and Machinery.

Manufacturing Production Capacity
Something Predicted For 2019 Reported For 2019 Predicted For 2020
  Predicted
May 2019
Magnitude
of Change
Reported
Dec 2019
Magnitude
of Change
Predicted
Dec 2019
Magnitude
of Change
Higher 37% +13.8% 39% +11.0% 44% +8.8
Same 57% NA 50% NA 50% NA
Lower 6% -9.9% 11% -10.5% 6% -10.7%
Net Average   +4.5%   +3.1%   +3.3%

The principal means of achieving increases in production capacity in 2019 were (in order of importance):

  1. Additional plant and/or equipment
  2. Additional personnel (permanent, temporary or contract)
  3. More hours worked with existing personnel
  4. Replaced equipment with technically advanced equipment

Non-Manufacturing


The capacity to produce products or provide services in the non-manufacturing sector increased 2.5 percent during 2019. This compares to the 2.4-percent increase reported in December 2018 for the year 2018 and is more than the May 2019 prediction of a 2 percent increase for 2019. For 2020, an increase of 3.6 percent is predicted. For 2019, 31 percent of non-manufacturing supply managers indicate increases averaging 10.4 percent, and 7 percent of respondents indicate decreases averaging 9.7 percent. Sixty-two percent saw no change in their capacity. The 16 industries reporting increases in capacity in 2019 — listed in order — are: Professional, Scientific & Technical Services; Real Estate, Rental & Leasing; Management of Companies & Support Services; Wholesale Trade; Utilities; Information; Retail Trade; Mining; Health Care & Social Assistance; Construction; Other Services; Transportation & Warehousing; Finance & Insurance; Public Administration; Arts, Entertainment & Recreation; and Accommodation & Food Services.

Non-Manufacturing Production or Provision Capacity
Something Predicted For 2019 Reported For 2019 Predicted For 2020
  Predicted
May 2019
Magnitude
of Change
Reported
Dec 2019
Magnitude
of Change
Predicted
Dec 2019
Magnitude
of Change
Higher 22% +10.7% 31% +10.4% 33% +11.7%
Same 75% NA 62% NA 64% NA
Lower 3% -13.8% 7% -9.7% 3% -6.3%
Net Average   +2.0%   +2.5%   +3.6%

The principal means of achieving increases in production or provision capacity in 2019 were (in order of importance):

  1. Additional personnel (permanent, temporary or contract)
  2. More hours worked with existing personnel
  3. Additional plant and/or equipment
  4. Replaced equipment with technically advanced equipment

CAPITAL EXPENDITURES - 2019 vs. 2018

Manufacturing


Purchasing and supply managers report 2019 capital expenditures increased 6.4 percent on average when compared to 2018 levels. The actual expenditures for 2019 were above survey respondents’ previous expectations, as they predicted an increase of 5.9 percent for 2019 in May 2019. The 34 percent of purchasers who reported increased capital expenditures in 2019 indicated an average increase of 36.8 percent, while the 21 percent who said their capital spending was reduced reported an average decrease of 28.3 percent. Forty-five percent of respondents said they spent the same in 2019 as in 2018. The 13 industries showing increases in capital expenditures for 2019 — listed in order of percentage increase — are: Wood Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Computer & Electronic Products; Textile Mills; Chemical Products; Transportation Equipment; Plastics & Rubber Products; Paper Products; Machinery; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Miscellaneous Manufacturing.

Non-Manufacturing


Non-manufacturing supply management executives report their level of capital expenditures in 2019 increased 2 percent compared to 2018. This is less than the 2.8-percent increase reported for 2018 one year ago, and less than the 2.1-percent increase predicted by respondents in May 2019. Thirty-seven percent report increases averaging 15 percent. An additional 17 percent report decreases averaging 20.5 percent. Forty-six percent indicate they spent the same on capital expenditures in 2019 as in 2018. The 12 industries experiencing increases in capital expenditures in 2019 — listed in order — are: Educational Services; Transportation & Warehousing; Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Utilities; Agriculture, Forestry, Fishing & Hunting; Wholesale Trade; Public Administration; Finance & Insurance; Professional, Scientific & Technical Services; Accommodation & Food Services; and Construction.

Capital Expenditures 2019 vs. 2018
Something Manufacturing Non-Manufacturing
  Predicted
May 2019
Reported
Dec 2019
Magnitude
of Change
Predicted
May 2019
Reported
Dec 2019
Magnitude
of Change
Higher 32% 34% +36.8% 26% 37% +15%
Same 55% 45% NA 60% 46% NA
Lower 12% 21% -28.3% 14% 17% -20.5%
Net Average +5.9%   +6.4% +2.1%   +2.0%

PREDICTED CAPITAL EXPENDITURES — 2020 vs. 2019

Manufacturing


Purchasing and supply executives expect capital expenditures to decrease 2.1 percent in 2020. The 29 percent of respondents who predict increased capital expenditures in 2020 indicate an average increase of 21.3 percent, while the 29 percent who said their capital spending would be reduced predict an average decrease of 29 percent. Forty-two percent said they expect to spend the same in 2020 as in 2019. The 10 industries predicting increases in capital expenditures above the average decrease of 2.1 percent for 2020 — listed in order of percentage increase — are: Wood Products; Printing & Related Support Activities; Machinery; Textile Mills; Petroleum & Coal Products; Fabricated Metal Products; Furniture & Related Products; Chemical Products; Miscellaneous Manufacturing; and Electrical Equipment, Appliances & Components.

Non-Manufacturing


Non-manufacturing purchasing and supply executives are expecting an increase of 1.3 percent in capital expenditures in 2020, less than the increase of 2 percent they are reporting for 2019. The 36 percent of respondents expecting to spend more on capital expenditures predict an average increase of 13.8 percent. An additional 19 percent anticipate a decrease averaging 19.4 percent. Forty-five percent expect to spend the same on capital expenditures in 2020 as in 2019. The 11 industries expecting increases in capital expenditures in 2020 — listed in order of percentage increase — are: Public Administration; Arts, Entertainment & Recreation; Construction; Accommodation & Food Services; Finance & Insurance; Information; Retail Trade; Other Services; Professional, Scientific & Technical Services; Management of Companies & Support Services; and Utilities.

Predicted Capital Expenditures 2020 vs. 2019
Something Manufacturing Non-Manufacturing
  Predicted
Dec 2019
Magnitude
of Change
Predicted
Dec 2019
Magnitude
of Change
Higher 29% +21.3% 36% +13.8%
Same 42% NA 45% NA
Lower 29% -29.0% 19% -19.4%
Net Average   -2.1%   +1.3%

PRICES — Changes Between End of 2018 and End of 2019

Manufacturing


After an earlier forecast in May 2019 of a 1.5-percent increase in prices paid for raw materials in 2019, survey respondents report realized price increases averaging 0.7 percent for the year 2019. The 49 percent who say their prices are higher now than at the end of 2018 report an average increase of 5.6 percent, while the 29 percent who report lower prices averaged a 7-percent decrease. The remaining 22 percent indicate no change between the end of 2019 and the end of 2018. The nine industries experiencing above average price increases of 0.7 percent in 2019 — listed in order — are: Food, Beverage & Tobacco Products; Textile Mills; Printing & Related Support Activities; Computer & Electronic Products; Plastics & Rubber Products; Machinery; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; and Transportation Equipment.

Manufacturing Price Changes Between End of 2018 and End of 2019
  Predicted
Dec 2018
Magnitude
of Change
Predicted
May 2019
Magnitude
of Change
Reported
Dec 2019
Magnitude
of Change
Higher 67% +6.0% 44% +4.8% 49% +5.6%
Same 22% NA 39% NA 22% NA
Lower 11% -6.1% 17% -4.0% 29% -7.0%
Net Average   +3.3%   +1.5%   +0.7%

Non-Manufacturing


As 2019 draws to a close, non-manufacturing supply managers report prices they pay have increased by 1.6 percent this year. This is slightly more than the 1.5-percent increase they predicted in May 2019, and less than the 3.6-percent increase for 2019 predicted one year ago. Fifty-three percent of purchasers report price increases averaging 4.6 percent. Ten percent of purchasers indicate decreased prices with an average reduction of 8.6 percent, and 37 percent of respondents have not experienced overall price changes this year. The nine industries reporting price increases above the average of 1.6 percent in 2019 — listed in order — are: Accommodation & Food Services; Other Services; Educational Services; Construction; Public Administration; Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Wholesale Trade; and Utilities.

 Predicted
Dec 2018Magnitude
of ChangePredicted
May 2019Magnitude
of ChangeReported
Dec 2019Magnitude
of Change
Non-Manufacturing Price Changes Between End of 2018 and End of 2019
Higher 69% +5.7% 47% +4.6% 53% +4.6%
Same 24% NA 41% NA 37% NA
Lower 7% -4.2% 12% -5.7% 10% -8.6%
Net Average   +3.6%   +1.5%   +1.6%

PRICES - Predicted Changes Between End of 2019 and May 2020

Manufacturing


Thirty-seven percent of purchasing and supply managers expect the prices they pay to increase in early 2020 by an average of 4.4 percent. At the same time, 24 percent anticipate decreases averaging 5.1 percent. Including the 39 percent who expect no change in prices in the first five months of 2020, purchasers expect the net average overall price increase of 0.4 percent. The 12 industries predicting a higher than 0.4 percent average increase in prices paid in the first part of 2020 — listed in order — are: Wood Products; Printing & Related Support Activities; Textile Mills; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Computer & Electronic Products; Plastics & Rubber Products; Fabricated Metal Products; Machinery; Petroleum & Coal Products; Food, Beverage & Tobacco Products; and Transportation Equipment.

Non-Manufacturing


Non-manufacturing survey respondents predict their purchases in the first five months of 2020 will cost an average of 1.6 percent more than at the end of 2019. This is the same as the increase reported in the preceding section for all of 2019. Fifty-six percent of non-manufacturing respondents predict the prices they pay will increase an average of 4.4 percent in the first part of 2020. Ten percent of respondents expect price decreases averaging 8.5 percent. The remaining 34 percent predict no change in prices in the first five months of 2020. The six industries predicting greater than or equal to the 1.6 percent average increase in prices they expect to pay in the first part of 2020 — listed in order of percentage increase — are: Accommodation & Food Services; Public Administration; Construction; Retail Trade; Wholesale Trade; and Professional, Scientific & Technical Services.

PRICES - Predicted Changes Between End of 2019 and May 2020
Something Manufacturing Non-Manufacturing
  Predicted
Dec 2019
Magnitude
of Change
Predicted
Dec 2019
Magnitude
of Change
Higher 37% +4.4% 56% +4.4%
Same 39% NA 34% NA
Lower 24% -5.1% 10% -8.5%
Net Average   +0.4%   +1.6%

PRICES - Predicted Changes Between End of 2019 and End of 2020

Manufacturing


Respondents predict a net average increase in prices paid of 1.1 percent between December 2019 and December 2020, indicating they expect a slight increase in prices during the period of May 2020 through December 2020. Fifty percent of respondents expect an average price increase of 5 percent for the full year of 2020, while 24 percent expect an average reduction of 5.9 percent. The remaining 26 percent expect no change in their average prices paid for the year 2020. The 11 industries expecting to receive increases above the predicted average of 1.1 percent by the end of 2020 — listed in order — are: Wood Products; Textile Mills; Petroleum & Coal Products; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Computer & Electronic Products; Furniture & Related Products; and Nonmetallic Mineral Products.

Non-Manufacturing


For all of 2020, non-manufacturing supply management executives expect their prices to increase an average of 1.9 percent. Fifty-seven percent of respondents expect increases averaging 4.6 percent, 12 percent anticipate prices to drop an average of 6.6 percent, and 31 percent foresee no change in prices during the next year. The six industries expecting greater than the 1.9-percent average price increase by the end of 2020 — listed in order of percentage increase — are: Public Administration; Agriculture, Forestry, Fishing & Hunting; Construction; Professional, Scientific & Technical Services; Other Services; and Accommodation & Food Services.

Predicted Price Changes Between End of 2019 and End of 2020
Something Manufacturing Non-Manufacturing
  Predicted
Dec 2019
Magnitude
of Change
Predicted
Dec 2019
Magnitude
of Change
Higher 50% +5.0% 57% +4.6%
Same 26% NA 31% NA
Lower 24% -5.9% 12% -6.6%
Net Average   +1.1%   +1.9%

LABOR AND BENEFIT COSTS — Predicted Rate Change End of 2019 vs. End of 2020

Manufacturing


Purchasing and supply executives expect slightly higher overall labor and benefit costs for 2020. Sixty-six percent of respondents expect increased labor and benefit costs and expect them to grow by an average of 3.6 percent for all of 2020, while the 7 percent forecasting lower costs see them decreasing by an average of 22 percent. Including the 27 percent of respondents who believe costs will remain the same, the overall net rate of increase is expected to be 0.7 percent between the end of 2019 and the end of 2020. The 15 industries expecting to pay an increase of 0.7 percent or greater — listed in order of percentage increase — are: Furniture & Related Products; Electrical Equipment, Appliances & Components; Chemical Products; Textile Mills; Fabricated Metal Products; Food, Beverage & Tobacco Products; Wood Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Computer & Electronic Products; Machinery; Paper Products; Apparel, Leather & Allied Products; and Transportation Equipment.

Non-Manufacturing


Purchasing and supply executives expect a 1.8-percent increase in labor and benefit costs for non-manufacturing industries in 2020. Fifty-nine percent of respondents expect such costs to increase by an average of 3.9 percent. Another 5 percent of respondents expect labor and benefit costs to shrink by an average of 10.2 percent, and 36 percent believe costs will remain stable during 2020. The eight industries expecting to pay an increase of 1.8 percent or higher — listed in order of percentage increase — are: Utilities; Wholesale Trade; Public Administration; Management of Companies & Support Services; Transportation & Warehousing; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; and Educational Services.

Labor and Benefit Costs — Predicted Rate Change End of 2019 vs. End of 2020
Something Manufacturing Non-Manufacturing
  Predicted for
2019
Dec 2018
Predicted for
2020
Dec 2019
Magnitude
of Change
Predicted for
2019
Dec 2018
Predicted
for 2020
Dec 2019
Magnitude
of Change
Higher 64% 66% +3.6% 71% 59% +3.9%
Same 33% 27% NA 27% 36% NA
Lower 3% 7% -22% 2% 5% -10.2%
Net Average +2.5%   +0.7% +3.2%   +1.8%

EMPLOYMENT — Change in Overall Employment

Manufacturing


ISM's Manufacturing Business Survey Committee members report that manufacturing employment decreased 0.6 percent in 2019 relative to 2018, and forecast that employment will increase by 0.1 percent, on average, for the full year of 2020 relative to 2019. Twenty-eight percent of respondents expect employment to be 7.9 percent higher in 2020, while 18 percent predict employment to be lower by 11 percent. The remaining 54 percent of respondents expect their employment levels to be unchanged in 2020. The 12 industries predicting increases in employment in 2020 — listed in order — are: Wood Products; Chemical Products; Fabricated Metal Products; Miscellaneous Manufacturing; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Textile Mills; Plastics & Rubber Products; Transportation Equipment; Furniture & Related Products; Food, Beverage & Tobacco Products; and Machinery.

Manufacturing Change in Overall Employment
  Reported for
2019 (since
May)
Dec 2019
Magnitude
of Change
Reported
for 2019
(since Dec
2018)
Magnitude
of Change
Predicted for
2020
Dec 2019
Magnitude
of Change
Higher 30% +6.7% 34% +7.7% 28% +7.9%
Same 44% NA 42% NA 54% NA
Lower 26% -8.6% 24% -13.3% 18% -11.0%
Net Average   -0.2%   -0.6%   +0.1%

Non-Manufacturing


ISM's Non-Manufacturing Business Survey Committee members report that non-manufacturing employment has increased 0.2 percent since May 2019. They forecast that employment will increase 1.2 percent by the end of 2020. In the coming year, 37 percent of respondents expect higher levels of employment, 11 percent anticipate lower levels, and 52 percent expect their employment levels to be unchanged. The 12 industries anticipating increases in their employment in 2020 — listed in order — are: Management of Companies & Support Services; Arts, Entertainment & Recreation; Professional, Scientific & Technical Services; Public Administration; Retail Trade; Construction; Health Care & Social Assistance; Mining; Utilities; Other Services; Wholesale Trade; and Real Estate, Rental & Leasing.

Non-Manufacturing - Change in Overall Employment
  Reported for
2019 (since
May)
Dec 2019
Magnitude
of Change
Reported
for 2019
(since Dec
2018)
Magnitude
of Change
Predicted for
2020
Dec 2019
Magnitude
of Change
Higher 36% +5.3% 43% +6.2% 37% +5.4%
Same 48% NA 39% NA 52% NA
Lower 16% -11.0% 18% -10.8% 11% -7.0%
Net Average   +0.2%   +0.8%   +1.2%

Note: A diffusion index above 50 percent would generally indicate an expectation of higher employment; below 50 percent, an expectation of lower employment.

EXPORT BUSINESS — Predicted Change for Next Half Year (First Half of 2020)

Manufacturing


The responses for this semiannual report indicate purchasers see increases in new export orders for the first half of 2020. Of the 77 percent of respondents who reported export sentiment, 38 percent predict an increase (35 percent moderate and 3 percent substantial) over the next six months. Fourteen percent of respondents predict a decrease (13 percent moderate and 1 percent substantial) in their exports, and 48 percent anticipate no change in exports over the next six months. The 11 industries expecting growth in exports during the first half of 2020 — listed in order — are: Wood Products; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Chemical Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Computer & Electronic Products; Miscellaneous Manufacturing; Machinery; Fabricated Metal Products; and Plastics & Rubber Products.

Non-Manufacturing


For the first half of 2020, non-manufacturing supply managers who report that their organizations engage in exporting are less optimistic concerning their export business. Of the 31 percent of non-manufacturing business survey respondents who report that they export, 24 percent predict an increase (22 percent moderate and 2 percent substantial) over the next six months. Seven percent of the respondents expect a decrease in their exports (7 percent moderate and 0 percent substantial), and 69 percent anticipate no change in exports over the next six months. Of the industries that report they export, the four industries expecting growth in export business in the first half of 2020 are: Mining; Professional, Scientific & Technical Services; Other Services; and Wholesale Trade.

Predicted Change in Export Business — Next Half Year
Something Manufacturing Non-Manufacturing
  Predicted
For 2019
Predicted
For 2020
Predicted
For 2019
Predicted
For 2020
  First Half
of 2019
Predicted
Dec 2018
First Half
of 2020
Predicted
Dec 2019
First Half
of 2019
Predicted
Dec 2018
First Half
of 2020
Predicted
Dec 2019
Substantial Increase 1% 3% 0% 2%
Moderate Increase 37% 35% 38% 22%
No Change 52% 48% 60% 69%
Moderate Decrease 9% 13% 2% 7%
Substantial Decrease 1% 1% 0% 0%
Diffusion Index 63.7% 61.6% 68.1% 58.2%

IMPORT BUSINESS — Predicted Change for Next Half Year (First Half of 2020)

Manufacturing


Purchasers expect increases in imports in the first half of 2020. Of the 87 percent of purchasers who reported they import, 31 percent predict an increase in their imports over the next six months (30 percent moderate and 1 percent substantial), while 24 percent predict a decrease in imports of materials (20 percent moderate and 4 percent substantial). Forty-five percent of survey respondents expect no change in imports in the first half of 2020. The nine industries expecting growth in imports — listed in order — are: Wood Products; Nonmetallic Mineral Products; Printing & Related Support Activities; Paper Products; Miscellaneous Manufacturing; Petroleum & Coal Products; Fabricated Metal Products; Chemical Products; and Machinery.

Non-Manufacturing


Non-manufacturers have lower expectations for the use of imports for the first half of 2020 than they did in December 2018 for the first half of 2019. Of the 50 percent of non-manufacturing organizations who reported they import, 24 percent (23 percent moderate and 1 percent substantial) predict an increase in their imports during the first half of 2020. Twenty-one percent of respondents (19 percent moderate and 2 percent substantial) predict a decrease in imports of materials and services. The remaining 55 percent of purchasers expect no change in imports over the next six months. The six industries expecting growth in imports — listed in order — are: Accommodation & Food Services; Transportation & Warehousing; Management of Companies & Support Services; Retail Trade; Wholesale Trade; and Professional, Scientific & Technical Services.

Predicted Change in Import Business — Next Half Year
Something Manufacturing Non-Manufacturing
  Predicted
For 2019
Predicted
For 2020
Predicted
For 2019
Predicted
For 2020
  First Half
of 2019
Predicted
Dec 2018
First Half
of 2020
Predicted
Dec 2019
First Half
of 2019
Predicted
Dec 2018
First Half
of 2020
Predicted
Dec 2019
Substantial Increase 3% 1% 2% 1%
Moderate Increase 26% 30% 26% 23%
No Change 44% 45% 55% 55%
Moderate Decrease 25% 20% 16% 19%
Substantial Decrease 2% 4% 1% 2%
Diffusion Index 50.6% 53.4% 55.2% 51.7%

INVENTORY-TO-SALES RATIO

Manufacturing


Of the manufacturing panel, 15 percent anticipate increasing their purchased inventory-to-sales ratio during 2020. An additional 29 percent expect their ratio to drop, and 56 percent see no change. The diffusion index of 43.3 percent suggests the inventory-to-sales ratio will decrease in 2020.

Non-Manufacturing


Eight percent anticipate increasing their purchased inventory-to-sales ratio during 2020. An additional 11 percent expect their ratio to drop, and 81 percent see no change. The diffusion index of 48.2 percent suggests the inventory-to-sales ratio will decrease in 2020.

Predicted Change in Purchased Inventory-to-Sales Ratio
Something Manufacturing Non-Manufacturing
  For 2019
Predicted
Dec 2018
For 2020
Predicted
Dec 2019
For 2019
Predicted
Dec 2018
For 2020
Predicted
Dec 2019
Greater 21% 15% 9% 8%
Same 62% 56% 87% 81%
Smaller 17% 29% 4% 11%
Diffusion Index 52.6% 43.3% 52.2% 48.2%

Note: A diffusion index above 50 percent would indicate an increase in the inventory-to-sales ratio; below 50 percent, a decrease in the ratio.

U.S. DOLLAR — Predicted Strength vs. Major Trading Currencies — in 2020 — Manufacturing Only

Manufacturing


Purchasing and supply executives are expecting the U.S. dollar will strengthen in 2020 against all the foreign currencies listed below. The average diffusion index for this forecast is 59.6 percent, a decrease of 7.1 percentage points over the December 2018 forecast average of 66.7 percent for 2019.

U.S. Dollar Will Be: Euro Canada $ British Pound Japanese Yen Mexican Peso Korean Won Taiwan $
Stronger than 44.8% 34.5% 47.6% 25.7% 47.2% 28.0% 29.1%
Same as 30.3% 53.4% 25.7% 60.6% 35.5% 59.6% 55.8%
Weaker than 24.9% 12.1% 26.7% 13.7% 17.3% 12.4% 15.1%
Diffusion Index 60.0% 61.2% 60.4% 56.0% 65.0% 57.8% 57.0%

Note: A diffusion index above 50 percent would predict a generally stronger U.S. dollar; below 50 percent, a generally weaker U.S. dollar, with the distance from 50 percent indicative of the predicted strength or weakness.

BUSINESS REVENUES

Business Revenues Comparison — 2019 vs. 2018

Manufacturing


Summarizing revenues for 2019, 51 percent of respondents say revenue was better than 2018, and that revenues increased an average of 9.1 percent over 2018. Twenty-six percent say their revenues decreased in 2019 by an average of 10.9 percent, and the remaining 23 percent indicate no change. Overall, purchasing and supply executives indicate a net increase of 1.9 percent in business revenues for 2019 over 2018. This is less than the 4 percent increase that was forecast in May 2019 for all of 2019 and less than the 5.7 percent increase predicted in December 2018 for all of 2019. The 14 industries reporting increases (highest to lowest) in revenues in 2019 — listed in order — are: Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Apparel, Leather & Allied Products; Wood Products; Transportation Equipment; Fabricated Metal Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Chemical Products; Computer & Electronic Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Textile Mills; and Machinery.

Manufacturing Business Revenues — 2019 vs. 2018
  Predicted
Dec 2018
% Change Predicted
May 2019
% Change Reported
Dec 2019
% Change
Higher 64% +10.2% 55% +9.5% 51% +9.1%
Same 25% NA 34% NA 23% NA
Lower 11% -7.6% 11% -11.1% 26% -10.9%
Net Average   +5.7%   +4.0%   +1.9%

Non-Manufacturing


Non-manufacturing supply management executives report that business revenues for 2019 have increased compared to 2018 by 4.4 percent. This is more than the 3.1 percent increase predicted in May 2019 for all of 2019. The 45 percent of respondents reporting better business in 2019 than in 2018 estimate an average revenue increase of 12.8 percent. This contrasts with an average decrease of 9.6 percent reported by the 14 percent of respondents who indicate worse business in 2019. The remaining 41 percent have experienced no change in 2019 from 2018. The 16 industries reporting increases in revenues in 2019 — listed in order — are: Professional, Scientific & Technical Services; Management of Companies & Support Services; Information; Transportation & Warehousing; Other Services; Real Estate, Rental & Leasing; Construction; Utilities; Mining; Health Care & Social Assistance; Accommodation & Food Services; Arts, Entertainment & Recreation; Finance & Insurance; Wholesale Trade; Educational Services; and Public Administration.

Non-Manufacturing - Business Revenues — 2019 vs. 2018
  Predicted
Dec 2018
% Change Predicted
May 2019
% Change Reported
Dec 2019
% Change
Higher 57% +7.4% 47% +9.2% 45% +12.8%
Same 35% NA 42% NA 41% N/A
Lower 8% -5.7% 11% -11.4% 14% -9.6%
Net Average   +3.7%   +3.1%   +4.4%

Business Revenues Prediction for 2020

Manufacturing


Manufacturing survey respondents forecast that business revenues for 2020 will be stronger than in 2019. The 58 percent of respondents forecasting better business revenues in 2020 than in 2019 estimate an average increase of 10.4 percent in their organizations’ revenues. This contrasts with an average decrease of 9.2 percent forecast by the 13 percent who predict lower business revenues in 2020. Including the 29 percent who see no change in 2020, the forecast for overall net increase in business revenues for 2020 over 2019 is 4.8 percent. All 18 manufacturing industries expecting revenue improvement in 2020 over 2019, listed in order: Fabricated Metal Products; Food, Beverage & Tobacco Products; Apparel, Leather & Allied Products; Paper Products; Furniture & Related Products; Chemical Products; Wood Products; Computer & Electronic Products; Miscellaneous Manufacturing; Machinery; Transportation Equipment; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Primary Metals; Printing & Related Support Activities; Textile Mills; Petroleum & Coal Products; and Nonmetallic Mineral Products.

Non-Manufacturing


Non-manufacturing survey respondents forecast that business revenues for 2020 will be improved over 2019 by an average of 3.4 percent. This is less than the 4.4-percent increase reported for 2019, and less than the 3.7-percent increase predicted one year ago for 2019 revenues over 2018 revenues. The 50 percent of respondents forecasting better business in 2020 than in 2019 estimate an average revenue increase of 8.7 percent. This contrasts with an average decrease of 8.3 percent forecast by the 11 percent who predict worse business in 2020. The remaining 39 percent see no change in 2020. The 17 industries expecting increases in revenues in 2020 — listed in order of percentage increase — are: Management of Companies & Support Services; Mining; Professional, Scientific & Technical Services; Wholesale Trade; Arts, Entertainment & Recreation; Other Services; Health Care & Social Assistance; Educational Services; Utilities; Information; Accommodation & Food Services; Retail Trade; Finance & Insurance; Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; and Public Administration.

Business Revenues — 2020 vs. 2019
Something Manufacturing Non-Manufacturing
  Predicted
Dec 2019
% Change Predicted
Dec 2019
% Change
Higher 58% +10.4% 50% +8.7%
Same 29% NA 39% NA
Lower 13% -9.2% 11% -8.3%
Net Average   +4.8%   +3.4%

PROFIT MARGINS

Manufacturing


Survey respondents report that profit margins decreased slightly on average during the second and third quarters of 2019, as 25 percent experienced an increase in profit margins, 39 percent had lower margins, and 36 percent reported no change. Overall, expectations are higher between now and May 2020, as 33 percent of respondents forecast better profit margins, 21 percent predict lower profit margins, and 46 percent predict no change. The 12 industries expecting an increase in profit margins through May 2020 — listed in order of percentage increase — are: Furniture & Related Products; Primary Metals; Nonmetallic Mineral Products; Chemical Products; Plastics & Rubber Products; Textile Mills; Electrical Equipment, Appliances & Components; Machinery; Transportation Equipment; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Miscellaneous Manufacturing.

Non-Manufacturing


Non-manufacturing supply management executives were asked about changes in profit margins their organizations recently experienced and are expecting in the near future. Their responses indicate that 21 percent experienced an increase in profit margins during the second and third quarters of 2019, while 25 percent found smaller profit margins, and 54 percent had no change in margins during the same period. From now through May 2020, 28 percent of supply managers expect improved profit margins, 16 percent expect lower profit margins, and the remaining 56 percent of respondents anticipate no change in their profit margins. The eight industries expecting an increase in profit margins through May 2020 — listed in order of percentage increase — are: Arts, Entertainment & Recreation; Management of Companies & Support Services; Retail Trade; Construction; Utilities; Professional, Scientific & Technical Services; Health Care & Social Assistance; and Transportation & Warehousing.

Profit Margins
Something Manufacturing Non-Manufacturing
  May 2019 through
Dec 2019
Reported Dec 2019
Dec 2019 through
May 2020
Predicted Dec 2019
May 2019 through
Dec 2019
Reported Dec 2019
Dec 2019 through
May 2020
Predicted Dec 2019
Better 25% 33% 21% 28%
Same 36% 46% 54% 56%
Worse 39% 21% 25% 16%
Diffusion Index 42.8% 55.7% 47.7% 56.0%

BUSINESS COMPARISON

The First Half of 2020 Compared with the Last Half of 2019

Manufacturing


Survey respondents are optimistic about the next six months, as reflected in the diffusion index of 61.6 percent. Comparing their outlook for the first half of 2020 to the last half of 2019, 45 percent predict it will be better, 22 percent predict it will be worse, and 33 percent expect no change. The 13 industries expecting improvement in the first half of 2020 — listed in order — are: Wood Products; Printing & Related Support Activities; Furniture & Related Products; Chemical Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Computer & Electronic Products; Plastics & Rubber Products; Machinery; Primary Metals; Transportation Equipment; Paper Products; and Electrical Equipment, Appliances & Components.

Non-Manufacturing


The first half of 2020 is predicted to be better than the last half of 2019, according to non-manufacturing purchasing and supply managers. The diffusion index indicating current expectations is 61.9 percent. Thirty-eight percent of respondents expect the first half of next year to be better than the last half of this year, 14 percent anticipate it will be worse, and 48 percent predict no change. The 13 industries expecting improvement in the first half of 2020 — listed in order — are: Management of Companies & Support Services; Mining; Utilities; Educational Services; Professional, Scientific & Technical Services; Construction; Other Services; Finance & Insurance; Real Estate, Rental & Leasing; Wholesale Trade; Public Administration; Transportation & Warehousing; and Health Care & Social Assistance.

Business — First Half 2020 vs. Last Half 2019
Something Manufacturing Non-Manufacturing
  Predicted
Dec 2019
Predicted
Dec 2019
Better 45% 38%
Same 33% 48%
Worse 22% 14%
Diffusion Index 61.6% 61.9%

Note: A diffusion index above 50 percent would generally indicate an expectation of the first half of the coming year being better than the second half of the current year.

The Second Half of 2020 Compared with the First Half of 2020

Manufacturing


Purchasing and supply executives are similarly optimistic about the second half of 2020 compared to the first half of 2020. The percentage of survey respondents who forecast the second half of 2019 to be better than the first half is 38 percent, while 15 percent expect it to be worse, and 47 percent expect no change. The diffusion index for the second half of 2020 is 62 percent, compared to 61.6 percent for the first half of 2020. The 14 industries predicting improvement in the second half of 2020 — listed in order — are: Paper Products; Wood Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Computer & Electronic Products; Chemical Products; Plastics & Rubber Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Nonmetallic Mineral Products; and Machinery.

Non-Manufacturing


Non-manufacturing purchasing and supply executives feel more optimistic about the second half of 2020 than for the first half of the year. (The diffusion index for the second half is 62.2 percent, and the first half is 61.9 percent.) The percentage of respondents who currently forecast the second half of 2020 to be better than the first half is 36 percent, while 12 percent expect it to be worse. An additional 52 percent of purchasers expect no change. The 12 industries expecting improvement in the second half of 2020 — listed in order — are: Arts, Entertainment & Recreation; Management of Companies & Support Services; Information; Transportation & Warehousing; Real Estate, Rental & Leasing; Finance & Insurance; Retail Trade; Health Care & Social Assistance; Construction; Wholesale Trade; Public Administration; and Other Services.

Business — Second Half 2020 vs. First Half 2020
Something Manufacturing Non-Manufacturing
  Predicted
Dec 2019
Predicted
Dec 2019
Better 38% 36%
Same 47% 52%
Worse 15% 12%
Diffusion Index 62.0% 62.2%

Note: A diffusion index above 50 percent would generally indicate an expectation of the second half of the coming year being better than the first half.

OUTLOOK FOR THE NEXT 12 MONTHS

Manufacturing


Compared to the outlook for 2019 reported in December 2018, survey respondents this year are less optimistic about the outlook for 2020. Forty-two percent of respondents believe 2020 will be better than 2019. Thirty-four percent of respondents believe 2020 will be the same as 2019, and 24 percent believe 2020 will be worse than 2019. The resulting diffusion index for the outlook for 2020 is 59.1 percent, compared with 65.8 percent for 2019 from one year ago.

Non-Manufacturing


Non-manufacturing survey respondents are overall less optimistic on their outlook, compared to their predictions for 2019. A smaller proportion of respondents this year believe 2020 will be better than 2019 and a larger proportion of respondents believe 2020 will be worse than 2019. The diffusion index looking forward into 2020 is lower than the diffusion index looking forward into 2019.

Outlook — Next 12 Months
Something Manufacturing Non-Manufacturing
  Predicted
for 2019
Dec 2018
Predicted
for 2020
Dec 2019
Predicted
for 2019
Dec 2018
Predicted
for 2020
Dec 2019
Better 48% 42% 45% 37%
Same 36% 34% 45% 49%
Worse 16% 24% 10% 14%
Diffusion Index 65.8% 59.1% 67.7% 61.4%

SPECIAL QUESTION TOPIC #1: HIRING WORKERS TO FILL OPEN POSITIONS


We asked the panel, “In the past six months, has your firm had difficulty hiring workers to fill open positions?”

Respondents indicated:

Hiring Workers to Fill Open Positions
Something Manufacturing Non-Manufacturing
Something Reported
Dec
2018*
Reported
May
2019
Reported
Dec
2019
Reported
Dec
2018*
Reported
May
2019
Reported
Dec
2019
We have had difficulty hiring 78.5% 76.0% 70.3% 72.8% 70.2% 69.4%
We have not had difficulty 21.5% 24.0% 23.1% 27.2% 29.8% 24.0%
Not applicable (we have not
had any open positions)
    6.5%     6.6%

SPECIAL QUESTION TOPIC #2: HIRING DIFFICULTIES

Manufacturing


We asked the panel, "If 'yes,' what have you done to deal with these difficulties?"

  • We didn't hire/were not able to hire as many workers as we would have liked (31.4%)
  • We raised wages (or used other forms of monetary compensation) to recruit new hires (39.9%)
  • We lowered our hiring standards (11.3%)
  • Something else (17.4%)

Non-Manufacturing


We asked the panel, "If 'yes,' what have you done to deal with these difficulties?"

  • We didn't hire/were not able to hire as many workers as we would have liked (38.7%)
  • We raised wages (or used other forms of monetary compensation) to recruit new hires (29.6%)
  • We lowered our hiring standards (9.2%)
  • Something else (22.5%)

SPECIAL QUESTION TOPIC #3: NO HIRING DIFFICULTIES

Manufacturing


We asked the panel, "If you have not had difficulty hiring, why not?"

  • The local labor market is not that tight; it was easy to find an ample supply of applicants (27.4%)
  • We raised wages in order to attract the applicants we needed (29.6%)
  • We lowered our hiring standards (3.7%)
  • We didn't have difficulty hiring because we weren't trying to hire new workers (12.9%)
  • Something else (26.4%)

Non-Manufacturing


We asked the panel, "If you have not had difficulty hiring, why not?"

  • The local labor market is not that tight; it was easy to find an ample supply of applicants (22.8%)
  • We raised wages in order to attract the applicants we needed (19%)
  • We lowered our hiring standards (5.1%)
  • We didn't have difficulty hiring because we weren't trying to hire new workers (15.2%)
  • Something else (38.0%)

SPECIAL QUESTION TOPICS #4 and #5: CAPITAL SPENDING PLANS


We asked the panel, “In the past six months, has your firm increased, decreased or left unchanged its capital spending plans for the next 12 months?”

Respondents indicated:

Capital Spending Plans
Something Manufacturing Non-Manufacturing
Something Reported
May 2019
Reported
Dec 2019
Reported
May 2019
Reported
Dec 2019
Increased capital spending plans 34.7% 26.7% 27.1% 35.8%
Decreased capital spending plans 17.9% 34.6% 18.8% 27.4%
No change to capital spending plans 47.4% 38.7% 54.1% 36.9%

SPECIAL QUESTION #5: CAPITAL SPENDING PLANS

Manufacturing


We asked the panel, “What is the primary reason capital spending plans changed?”

  • Domestic economic conditions (38.4%)
  • Implemented tariffs (3.4%)
  • Uncertainty surrounding trade policy (7.5%)
  • Foreign economic conditions (4.0%)
  • Regulatory reform (1.5%)
  • Business tax reform (0.8%)
  • Other (44.4%)

Non-Manufacturing


We asked the panel, “What is the primary reason capital spending plans changed?”

  • Domestic economic conditions (37.5%)
  • Implemented tariffs (4.4%)
  • Uncertainty surrounding trade policy (2.9%)
  • Foreign economic conditions (0.7%)
  • Regulatory reform (8.1%)
  • Business tax reform (1.5%)
  • Other (44.9%)

SPECIAL QUESTION TOPIC #6: TARIFFS


We asked the panel, “Have the recently enacted or proposed tariffs on input materials led you to raise the price of goods that you produce and deliver to your customers? And, if ‘yes,’ by what percentage?”

Respondents indicated:

Tariffs Will Lead/Led to Higher Prices
Something Manufacturing Non-Manufacturing
Something Reported
May 2019
Reported
Dec 2019
Reported
May 2019
Reported
Dec 2019
Yes 59.1% 39.5% 35.7% 23.7%
No 40.9% 60.5% 64.3% 76.3%
If “Yes,” Average Increase 6.8% 8.7% 7.7% 8.3%

SPECIAL QUESTION TOPIC #7: TARIFFS


We asked the panel, “Are input material tariffs impacting your supply chain's ability to deliver?”

Respondents indicated:

Tariffs Will Impact/Impacting Delivery
Something Manufacturing Non-Manufacturing
Something Reported
May 2019
Reported
Dec 2019
Reported
May 2019
Reported
Dec 2019
Yes 29.8% 35.5% 26.6% 23.1%
No 70.2% 64.5% 73.4% 76.9%

SPECIAL QUESTION TOPIC #8: TARIFFS

Manufacturing


We asked the panel, “Are current or potential counter tariffs affecting your company’s ability to export products and meet your revenue goals?” Manufacturing respondents indicated:

  • Yes (25.2%)
  • No (74.8%)

Non-Manufacturing


We asked the panel, “Are current or potential counter tariffs affecting your company’s ability to export products and meet your revenue goals?” Non-Manufacturing respondents indicated:

  • Yes (13.5%)
  • No (86.5%)

SPECIAL QUESTION TOPIC #9: TARIFFS

Manufacturing


We asked the panel, “Is your company evaluating new sources of supply and changes to your existing manufacturing footprint as a result of U.S. tariffs?” Manufacturing respondents indicated:

  • We are evaluating new sources of supply (53.1%)
  • We are changing our existing footprint (4.2%)
  • Both (19.5%)
  • Neither (23.2%)

Non-Manufacturing


We asked the panel, “Is your company evaluating new sources of supply and/or changes to your existing footprint as a result of U.S. tariffs?” Non-Manufacturing respondents indicated:

  • We are evaluating new sources of supply (43.9%)
  • We are changing our existing footprint (1.3%)
  • Both (14.6%)
  • Neither (40.1%)

SPECIAL QUESTION TOPIC #10: TARIFFS

Manufacturing


We asked the panel, “Is your company evaluating new sources of supply and changes to your existing manufacturing footprint as a result of counter-tariffs?” Manufacturing respondents indicated:

  • We are evaluating new sources of supply (42.5%)
  • We are changing our existing manufacturing footprint (2.0%)
  • Both (15.7%)
  • Neither (39.8%)

Non-Manufacturing


We asked the panel, “Is your company evaluating new sources of supply and changes to your existing manufacturing footprint as a result of counter-tariffs?” Non-Manufacturing respondents indicated:

  • We are evaluating new sources of supply (31.8%)
  • We are changing our existing footprint (0.7%)
  • Both (15.2%)
  • Neither (52.3%)

Summary

Manufacturing


The manufacturing sector is currently contracting, but the forecast indicates that it may turn around in the first half of 2020 and expand at a slightly higher rate in the second half of 2020.

  • Operating rate is currently at 83.7 percent.
  • Production capacity increased by 3.1 percent in 2019.
  • Production capacity is expected to increase by 3.3 percent in 2020.
  • Capital expenditures increased 6.4 percent in 2019.
  • Capital expenditures are expected to decrease 2.1 percent in 2020.
  • Prices paid increased 0.7 percent in 2019.
  • Overall, 2020 prices paid are expected to increase 1.1 percent.
  • Labor and benefit costs are expected to increase 0.7 percent in 2020.
  • Manufacturing employment is expected to increase 0.1 percent in 2020.
  • Expect growth in U.S. exports in 2020.
  • Expect growth in U.S. imports in 2020.
  • Manufacturing revenues are up 1.9 percent in 2019.
  • Manufacturing revenues are expected to increase 4.8 percent in 2020.
  • The U.S. dollar is expected to strengthen versus all major trading partner currencies in 2020.
  • Overall, manufacturing supply managers have an optimistic outlook, with 76 percent of respondents predicting 2020 will be the same as or better than 2019.

Non-Manufacturing


The non-manufacturing sector continues to expand, and the forecast indicates an increased rate of expansion in 2020.

  • Operating rate is currently at 86 percent.
  • Production capacity increased 2.5 percent in 2019.
  • Production and provision capacity is expected to increase 3.6 percent in 2020.
  • Capital expenditures increased 2 percent in 2019.
  • Capital expenditures are expected to increase 1.3 percent in 2020.
  • Prices paid increased 1.6 percent in 2019.
  • Prices paid are expected to increase 1.9 percent in 2020.
  • Labor and benefit costs are expected to increase 1.8 percent in 2020.
  • Employment is expected to increase 1.2 percent in 2020.
  • Expect export levels to increase in 2020.
  • Expect import growth in 2020.
  • Non-manufacturing revenues are up 4.4 percent in 2019.
  • Non-manufacturing revenues are expected to rise 3.4 percent in 2020.
  • Overall, non-manufacturing supply managers have a mostly positive outlook, with 86 percent of respondents predicting 2020 will be the same as or better than 2019.

*Miscellaneous Manufacturing includes items such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies.

**Other Services include services such as equipment and machinery repairing; promoting or administering religious activities; grant making; advocacy; and providing dry-cleaning and laundry services, personal care services, death care services, pet care services, photofinishing services, temporary parking services, and dating services.

About This Report

The data presented herein is obtained from a survey of manufacturing and non-manufacturing supply executives nationwide based on information they have collected within their respective organizations. ISM® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making.

Data and Method of Presentation

In addition to this forecast, the Manufacturing ISM® Report On Business® is issued monthly and is considered by many economists to be the most reliable near-term economic barometer available. It is reviewed regularly by government agencies and economic business leaders. The report, compiled from responses to questions asked of purchasing and supply executives across the country, tracks industrial production, new orders, inventories, supplier deliveries, imports, exports, backlog of orders, employment, customers' inventories, buying policies and prices. The report has been issued by the association since 1931, except during World War II. Results shown for Manufacturing are based on data compiled from all manufacturing sub-sectors: 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 (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

Covering the non-manufacturing sector, ISM debuted the Non-Manufacturing ISM® Report On Business® in June 1998. The Non-Manufacturing ISM Report On Business® is released on the third business day of each month and is based on data received from purchasing and supply executives across the country. The report covers business activity, new orders, backlog of orders, new export orders, inventory change, inventory sentiment, imports, prices, employment, and supplier deliveries. Results shown for Non-Manufacturing are based on data compiled from all non-manufacturing sectors: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Construction; Wholesale Trade; Retail Trade; Transportation & Warehousing; Information; Finance & Insurance; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Management of Companies & Support Services; Educational Services; Health Care & Social Assistance; Arts, Entertainment & Recreation; Accommodation & Food Services; Public Administration; and Other Services (services such as Equipment & Machinery Repairing; Promoting or Administering Religious Activities; Grantmaking; Advocacy; and Providing Dry-Cleaning & Laundry Services, Personal Care Services, Death Care Services, Pet Care Services, Photofinishing Services, Temporary Parking Services, and Dating Services).

The industries reporting growth, as indicated in the Manufacturing and Non-Manufacturing ISM® Report On Business® monthly reports, and in this semiannual forecast, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

The Manufacturing and Non-Manufacturing ISM® Report On Business® is published monthly by the Institute for Supply Management®, the first supply institute in the world. Founded in 1915, ISM's mission is to enhance the value and performance of procurement and supply chain management practitioners and their organizations worldwide. By executing and extending its mission through education, research, standards of excellence and information dissemination — including the renowned monthly ISM® Report On Business® — ISM maintains a strong global influence among individuals and organizations. ISM is a not-for-profit educational association that serves professionals with an interest in supply management who live and work in more than 80 countries. ISM offers the Certified Professional in Supply Management® (CPSM®) and Certified Professional in Supplier Diversity® (CPSDTM) qualifications.

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