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ISM Forecasts Manufacturing to Expand in 2020

Bill Koenig
By Bill Koenig Senior Editor, SME Media

Manufacturing should expand in the first half of 2020, including increased revenue for companies, the Institute for Supply Management said this week in a semi-annual forecast.

“We think 2020 half one going into half two will be a better economic situation” than the second half of 2019, Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a Dec. 9 conference call.

The forecast is based on a survey of purchasing and supply executives across 18 manufacturing industries. It’s the same group that ISM surveys when compiling its monthly manufacturing index.

That index, known as the PMI, has indicated the manufacturing economy contracted for four straight months through November. However, the forecast for 2020 for more upbeat.

The executives expect overall 2020 revenues to rise an average of 4.8 percent, with increases spread across all 18 industries.

Respondents also expect that growth will continue in the second half of 2020, Fiore said.

“We think we’re going to have a fairly stable year at fairly moderate growth compared to the last three years,” he said.

However, part of the forecast reflected some softening in the manufacturing economy.

Those surveyed said their companies are operating at 83.7 percent of normal capacity. That’s down from May’s 84.2 percent and 85.2 percent in December 2018.

The purchasing and supply managers also expect capital expenditures to fall by 2.1 percent in 2020. That follows a 6.4 percent increase for this year.

 The forecast also said employment will rise slightly, increasing 0.1 percent on average for 2020 compared with 2019.

Trade Concerns

The surveyed executives expressed concerned about ongoing trade tensions, which include an unresolved trade war between the U.S. and China.

“The supply community is actively looking for and implementing new sources of supply due to import tariffs and counter-tariffs,” Fiore said.

Tariffs are government levies on imported goods. They are paid by companies importing products and the cost often is passed onto customers. They not payments from one country to another.

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