ISM Sees U.S. Escaping Recession in 2013, Growth to Continue
Apr 30th 2013 11:55AM
The Institute for Supply Management (ISM) is out with a preliminary report, which calls for the United States not to fall into recession. Today's report is on the heels of a weaker-than-expected Chicago Purchasing Managers report, but also after a stronger-than-expected Conference Board report on consumer confidence for April. This new communications break is signaling that the ISM sees growth continuing in 2013.
Be advised that this early annual outlook comes a day ahead of the PMI and ISM manufacturing reports for April and three days ahead of the Labor Department's report on payrolls and unemployment. This outlook is also three days ahead of the ISM nonmanufacturing report for April. A cynic's view would likely be that this report is meant to sugar-coat weaker-than-expected economic reports due this week.
We have broken out the operating rates and the capacity rates projected in different groups to keep the report consistent. These projections are also broken out individually for manufacturing and nonmanufacturing for 2013.
Manufacturing growth is expected to continue in 2013 with revenue gains of 4.8%. Capital investment is expected to increase 9.1%. Capacity utilization is projected to be 80.2%, which is well above the recent trends running in the 78% and higher range reported for the broad economy when the Commerce Department reports its overall capacity utilization. We would point out that the ISM represents that this manufacturing operating rate projection is above the 77.5% reported in December 2012, but it is also lower than the 81.6% reported in April 2012. On the capacity rate projection, this production capacity in manufacturing is expected to increase 6.7% in 2013, under the 6.8% increase predicted in December 2012, but much higher than the 1.3% increase reported in December for 2012.
The report says on manufacturing:
Sixty-six percent of respondents from the panel of manufacturing supply management executives predict their revenues will be 9.9 percent greater in 2013 compared to 2012, 12 percent expect a 14.6 percent decline, and 22 percent foresee no change.
Nonmanufacturing growth also is expected to continue in 2013, with revenue increasing by 3.5%. Capital investment is expected to increase by 3.6%, and capacity utilization in services and nonmanufacturing running at 84.7%. Be advised that this operating rate is actually less than the 85.4% reported in December 2012 and less than the 85.2% reported in April 2012. The capacity to produce products or provide services in the nonmanufacturing sector is now projected to increase by 2.3% during 2013. This compares to a gain of 3.2% for 2012 and a prediction in December 2012 for an increase of 3.4% for 2013.
The report says on nonmanufacturing:
Fifty-six percent of non-manufacturing purchasing and supply executives expect their 2013 revenues to be greater by 7.9 percent than in 2012. Overall, respondents currently expect a 3.5 percent net increase in overall revenues, which is less than the 4.3 percent increase that was forecast in December 2012.
Today's report comes from a survey of the nation's purchasing and supply executives in their spring 2013 Semiannual Economic Forecast. That full report can be found here.
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