The manufacturing economy may improve next year amid uncertainty, the Institute for Supply Management said today in a semi-annual forecast.
The Tempe, Ariz.-based organization surveyed executives in 18 manufacturing industries. It’s the same group of executives ISM surveys in compiling its monthly manufacturing index, known as the PMI.
The PMI indicated that manufacturing fell into contraction in November after a 29-month streak of economic expansion. The PMI for the month was 49 percent. A PMI above 50 percent indicates expansion while below that mark reflects contraction.
Respondents surveyed expect a 5.5 percent net increase in overall revenue for the year, compared with a 9.3 percent increase this year.
Fifteen industries expect revenue improvement, including transportation equipment, fabricated metal products, machinery, and miscellaneous manufacturing.
However, respondents also expressed pessimism about the first half of 2023, with improvement taking place in the year’s second half.
“We’re definitely going to be in contraction but at a relatively weak rate” during the first half of next year, Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call.
“These numbers are not super dramatic,” he added. “This is a very unclear period. It’s been very hard to figure out.”
Respondents reported their companies operating at 88.4 percent of normal capacity, up from 87.2 percent reported in May. Those surveyed project capital expenditures will rise 2.6 percent in 2023, compared with 12 percent reported for 2022 compared with the year before.
Manufacturers also expect employment to expand for all of next year by 3.9 percent.
Like many sectors, manufacturing is feeling the effects of rising interest rates. The Federal Reserve is boosting rates as it tries to cool down the economy and reduce inflation.
Fiore said the Fed’s actions may not have a huge impact on manufacturing.
“We don’t see rates as a significant headwind in terms of 2023 performance,” Fiore said.
Connect With Us
