Supply Managers Foresee Strong 2nd Half
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 ISM Report 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 GlanceOperating 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.