December 2010
Over The Wire Tissue Edition
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U.S. Manufacturing Sector, Including P&P, to Continue Recovery in 2011

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Economic growth in the U.S. will continue in 2011, according to the nation’s purchasing and supply management executives in their Semiannual Economic Forecast this month. The projections are part of a forecast issued by the Business Survey Committee of the Institute for Supply Management (ISM), Tempe, Ariz., USA. Expectations are for a continuation of the economic recovery that began in mid-2009. The manufacturing sector continues to outpace the non-manufacturing sector.

The manufacturing sector, overall, is positive about prospects in 2011 with revenues expected to increase in 16 of 18 industries, including pulp and paper, while the non-manufacturing sector appears slightly less positive about the year ahead, with 12 of 18 industries expecting higher revenues. Business investment, a major driver in the U.S. economy, will increase substantially in the manufacturing sector, while investment in the non-manufacturing sector will increase at a lower level. In the manufacturing sector, 6% of survey respondents expect revenues to be greater next year than this year. The panel of purchasing and supply executives expects a 5.6% net increase in overall revenues for 2011, compared with a 7.9% increase reported for this year.

In the manufacturing sector, respondents report operating at 80.2 % of normal capacity, up from 72.8% reported in April 2010. Purchasing and supply executives predict that capital expenditures will increase by 14.5% in 2011, compared with a 5.9% increase in 2010. Survey respondents also forecast that they will reduce inventories in an effort to improve their purchased inventory-to-sales ratio in 2011. Manufacturers have an expectation that employment in the sector will increase by 1.8%, while labor and benefits costs are expected to increase an average of 1.9% in 2011. Manufacturing purchasers are predicting strength in exports and imports in 2011. They also expect the U.S. dollar to weaken on average against the currencies of major trading partners. The panel also predicts the prices they pay will increase 2.7% during the first four months of 2011, and will increase an additional 1.3% during the balance of the year, with an overall increase of 4% for 2011.

Manufacturing purchasing and supply executives report their companies are currently operating at 80.2% of normal capacity. This is a significant increase when compared with April 2010 (72.8%) and December 2009 (70.1%). Paper products are among 11 industries operating above the average rate of 80.2%, Surprisingly, the paper industry was also among those reporting an overall increase in production capacity in 2010. Some 14.5% of respondents, not including pulp and paper, expect to increase capital expenditures next year, and 50% of those indicate an average increase of 35%.

More detailed information on this extensive survey is available online.



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