Economic growth in the United States will continue in the second half of 2006, say the nation's purchasing and supply management executives in their spring 2006 Semiannual Economic Forecast conducted by the Institute for Supply Management (ISM).

Fully 72% of survey respondents forecast revenues to be greater in 2006 than in 2005. The panel of purchasing and supply executives now expects a 6.6% net increase in overall revenues for 2006 compared to their December 2005 forecast of 5.4%.

Manufacturing purchasing and supply executives report that their companies are currently operating at 85.6% of normal capacity. This is an increase from December 2005 (85.3%) but less than the rate reported in April 2005 (86.8%). Although the current rate is slightly less than the 10-year high reported in April 2000 (87.4%), it is two percentage points higher than the 10-year average of 83.6%. Recent monthly data from the Manufacturing ISMReport On Business® indicates the manufacturing sector has grown for 35 consecutive months.

Manufacturing production capacity is now expected to increase 5.6% in 2006. This is slightly higher than the expected increase of 5.3% predicted in the December 2005 forecast for 2006.

After an initial forecast in December 2005 of a 3.5% increase in prices paid during the first four months of 2006, manufacturing survey respondents report that prices are slightly above expectations. They now report an increase of 4% for the period, as the 75% who say their prices are higher now than at the end of 2005 report an average increase of 5.9%, while the 9% who report lower prices averaged a 5.2% decrease. The remaining 16% indicate no change between the end of 2005 and April 2006.

Manufacturing Outlook At A Glance

Operating rate is currently 85.6% of normal capacity...
  • Operating rate is currently 85.6% of normal capacity.
  • Production capacity will increase 5.6% in 2006.
  • Capital expenditures will increase 6.1% in 2006.
  • Prices paid increased 4% through the end of April.
  • Expect an additional 0.2% increase in prices by the end of 2006.
  • Manufacturing employment will increase 0.9% during the balance of 2006.
  • Manufacturing revenues will increase 6.6% in 2006.
  • Overall, manufacturing is benefiting from revenue growth and a high utilization rate, and is willing to invest through capital expansion.