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Manufacturers Expect Revenue To Grow 4.4 Percent in 2014, ISM Says

Wednesday, December 11, 2013
By Diana Gregg

Dec. 10 --Manufacturers are moderately upbeat about their business prospects for 2014, with 69 percent expecting their revenues will be greater next year than in 2013, the Institute for Supply Management said Dec. 10.

Purchasing and supply executives surveyed by the ISM expect a 4.4 percent net increase in overall revenues next year, compared to a 4.6 percent increase for this year over last. Sixteen industries look for revenues to rise next year.

Fifty-eight percent of executives in non-manufacturing firms expect their 2014 revenues to be greater than this year; they look for a 3.6 percent increase, compared to a 4 percent increase reported in 2013 over 2012. Fourteen services sector industries expect their industries to see higher revenues.

The findings are part of the ISM's semiannual economic forecast.

8 Percent Rise for Capital Spending
Capital expenditures are predicted to increase by 8 percent in the manufacturing sector next year. That's down from the 12.3 percent gain reported for this year, a figure the survey points out is stronger than the 9.1 percent increase the executives forecast in the April survey.

The 13 industries expecting to boost spending next year were led by electrical equipment and appliances, chemical products and paper products.

Spending is expected to rise 4.6 percent in the non-manufacturing sector, more than the 4.2 percent gain reported for this year; 11 industries expect to have higher capital spending in 2014, led by arts and entertainment, real estate and educational services.

On the employment front, manufacturing executives predict their employment base will grow on average by 2.4 percent after rising 1.7 percent this year since April of this year. Labor and benefits costs will rise 2.3 percent next year.

This compares to non-manufacturing executives' expectation of a 2.1 percent increase in employment and a 2.6 percent rise in labor and benefit costs. Since April, employment in the services sector has risen 0.4 percent.

Of the 82 percent of manufacturing executives in the survey whose companies export, 50 percent expect higher exports over the next half-year.

In the non-manufacturing sector, of the 26 percent who export, 36 percent predict an increase over the next half-year.

Prices Paid Seen Rising 1.6 Percent
Prices paid for raw materials by manufacturers are expected to rise 1.6 percent, stronger than this year's 0.9 percent increase.

Non-manufacturers anticipate a 1.9 percent increase next year in the prices they pay for materials and services, compared to 1.3 percent for this year.

Forty-one percent of manufacturing executives expect the first half of next year to be better than the second half of 2013. Somewhat more, 43 percent, expect the second half of next year to improve over the first half.

For non-manufacturers, 43 percent expect the first half of next year to be better than the second half of this year, which rises to 45 percent when it comes to measuring the second half of next year against the first half.

The capacity utilization rate for manufacturers currently is at 80.3 percent and is 86.3 percent for the services sector, according to the survey.

To contact the reporter on this story: Diana Gregg in Washington at dgregg@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

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