Manufacturers Remain Confident About 2005
The latest survey, released in early May, found manufacturing executives reporting that their companies are currently operating at 86.8% of normal capacity. This is an increase from December 2004 (83%) and greater than the rate reported in April 2004 (85.6%), though slightly less than the 10-year high reported in May 2000 (87.4%). Recent monthly data from the Manufacturing ISM “Report on Business” indicates the manufacturing sector has grown for 23 consecutive months.
Production capacity is now expected to increase 6% in 2005. This is slightly higher than the expected increase of 5.6% predicted in the December 2004 forecast for 2005.
Supply executives expect capital expenditures to rise 9.8% in 2005. This is a significant increase in expectations when compared to the prediction of 1.6% in the December 2004 forecast for 2005.
After an initial forecast in December 2004 of a 4.3% increase in prices paid during the first four months of 2005, survey respondents report that prices are slightly above expectations. They now report an increase of 4.5% for the period.
The forecast indicates respondents expect price increases to moderate during the period of May 2005 through December 2005 at a rate of 0.7%. They predict a net average increase of 5.2% between December 2004 and December 2005.
Sidebar: Manufacturing Survey Summary
- Operating rate is currently 86.8% of normal capacity.
- Production capacity will increase 6.0% in 2005.
- Capital expenditures will increase 9.8% in 2005.
- Prices paid increased 4.5% through end of April.
- Expect an additional 0.7% increase by end of 2005.
- Manufacturing employment will increase 1.2% during the balance of 2005.
- Manufacturing revenues will increase 6.8% in 2005.
- Overall, manufacturing is benefiting from revenue growth and a high utilization rate, and is willing to invest through capital expansion.