ISM - ISM Report - Supplemental ISM Report On Business® Brexit Report
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FOR RELEASE: July 1, 2016

Contact:   Kristina Cahill
Report On Business® Analyst
ISM®, ROB/Research Manager
Tempe, Arizona
800/888-6276, Ext. 3015
E-mail: kcahill@instituteforsupplymanagement.org



Supplemental ISM Report On Business® Brexit Report

ISM Addresses Economic Concerns on Historic Brexit Event through ISM Report On Business® Brexit Report to Be Released on July 1, 2016.


TEMPE (July 1, 2016) – Last Thursday, June 23, 2016, the electorate of the United Kingdom voted to withdraw from the European Union. The final tally was 52 percent voting to leave the European Union and 48 percent voting to remain a member of the European Union. This largely unexpected result rattled markets. The next trading day, Friday, June 24, saw the Dow Jones Industrial Average open lower and close down almost 600 points. Although markets have recovered somewhat since Monday, a sense of unease persists.

 

“Great Britain’s vote to leave the European Union is historic,” said Thomas W. Derry, Chief Executive Officer of Institute for Supply Management. “We saw that polling our manufacturing and non-manufacturing Business Survey Committees might provide important information to the markets with regard to how procurement executives view their business prospects for the remainder of the year.”

 

The survey found that, while most procurement executives do not foresee major disruptions, many are cautiously watching the situation closely and believe Brexit will hamper growth.

 

When asked to project what could be the net financial impact of Brexit on their organization, a majority believed Brexit would have a negligible impact on their firm. About one in three surveyed thought their firm would be negatively or slightly negatively impacted. Only a small proportion (less than 10 percent) felt their business would be positively or at least slightly positively impacted by Brexit.

 

For the remainder of 2016, due to Brexit, what do you expect to be the net financial impact on your organization?

Composite

Manufacturing

Non-Manufacturing

Negative impact

6%

7%

6%

Slightly negative impact

27%

31%

26%

Negligible impact

61%

58%

61%

Slightly positive impact

4%

4%

4%

Positive impact

2%

0%

2%

 

Among those projecting a negative impact, it was reported that changes in the exchange value of the dollar could be the most direct cause of their challenges. Changes in global demand is seen as a secondary cause and a change in demand for goods and services by their customers in the United Kingdom is seen as a possible, though somewhat unlikely, reason for not meeting expectations.

 

Do you expect the net negative financial impact to largely result from ...

Rank each item. "1" is most impactful. "4" is least impactful.

Manufacturing

Non-Manufacturing

% Rank 1

Average
Rank

% Rank 1

Average
Rank

Changes in the exchange value of the dollar

51%

1.7

43%

1.8

Changes in demand globally

30%

2.1

27%

2.1

Changes in demand by customers in the United Kingdom

14%

2.4

20%

2.6

 

For the remainder of 2016, procurement executives indicated that they were most concerned about financial market uncertainty and currency movements. Secondarily, they were concerned about global growth overall. Supply management executives were least concerned about their firm’s trade links with the U.K. and EU.

 

For the remainder of 2016, is your firm concerned about the impact of Brexit on …

       
 

Financial market uncertainty

Composite

Manufacturing

Non-Manufacturing

Not concerned

12%

10%

12%

Somewhat concerned

62%

65%

61%

Very concerned

27%

25%

27%

       
 

Currency movements

Composite

Manufacturing

Non-Manufacturing

Not concerned

29%

19%

31%

Somewhat concerned

48%

55%

46%

Very concerned

23%

26%

23%

       
 

Global growth

Composite

Manufacturing

Non-Manufacturing

Not concerned

33%

28%

33%

Somewhat concerned

51%

57%

49%

Very concerned

17%

15%

17%

       
 

Your firm's trade links with
the U.K. and EU

Composite

Manufacturing

Non-Manufacturing

Not concerned

55%

44%

58%

Somewhat concerned

34%

45%

32%

Very concerned

11%

11%

11%

 

A strong majority of those queried believed Brexit would have a negligible impact on their capital spending plans. Fewer than one in five respondents expected that their capital budgets would be negatively impacted. Only a very small proportion of respondents saw Brexit as spurring their capital budget.

 

For the remainder of 2016, due to Brexit, what do you expect to be the net financial impact on your organization’s capital spending?

Composite

Manufacturing

Non-Manufacturing

Negative impact

4%

4%

3%

Slightly negative impact

13%

10%

13%

Negligible impact

81%

84%

81%

Slightly positive impact

1%

2%

1%

Positive impact

1%

0%

1%

 

Supply management executives were asked if their firms were likely to respond to the vote by employing various tactics to slim down or downwardly management their workforce. Overwhelmingly, respondents reported that would not or probably would not take such measures. Only a small proportion of panelists reported that their firms would or probably would hire fewer workers or more frequently utilize short-term labor contracts. Even fewer indicated they might make more use of third-party contingent labor. Less than 10 percent thought their firm might or would reduce the size of their workforce.

Given the vote on Brexit, due to heightened uncertainty, for the remainder of 2016, does your firm anticipate …

       
 

Hiring fewer workers

Composite

Manufacturing

Non-Manufacturing

Yes

5%

3%

5%

Probably yes

10%

11%

10%

Probably no

25%

19%

26%

No

60%

67%

59%

       
 

Using more short-term labor contracts

Composite

Manufacturing

Non-Manufacturing

Yes

1%

1%

1%

Probably yes

14%

12%

14%

Probably no

20%

19%

20%

No

65%

68%

65%

       
 

Using more third-party contingent labor
the U.K. and EU

Composite

Manufacturing

Non-Manufacturing

Yes

2%

1%

2%

Probably yes

11%

13%

10%

Probably no

20%

15%

21%

No

67%

71%

67%

       
 

Reducing the labor force

Composite

Manufacturing

Non-Manufacturing

Yes

1%

3%

1%

Probably yes

8%

5%

8%

Probably no

24%

22%

24%

No

67%

70%

67%

 

Data collection for this study began on Saturday, June 25, 2016, and concluded on July 1, 2016. The results presented here are based on data collected through the afternoon of Wednesday, June 29, 2016.

About This Report

The data presented herein is obtained from a survey of manufacturing and non-manufacturing supply executives based on information they have collected within their respective organizations. ISM® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making.

Data and Method of Presentation

The Manufacturing and Non-Manufacturing ISM® Report On Business® is based on data compiled from purchasing and supply executives nationwide. Membership of the Non-Manufacturing Business Survey Committee is diversified by NAICS, based on each industry’s contribution to gross domestic product (GDP). The Non-Manufacturing Business Survey Committee responses are divided into the following NAICS code categories: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Construction; Wholesale Trade; Retail Trade; Transportation & Warehousing; Information; Finance & Insurance; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Management of Companies & Support Services; Educational Services; Health Care & Social Assistance; Arts, Entertainment & Recreation; Accommodation & Food Services; Public Administration; and Other Services (services such as Equipment & Machinery Repairing; Promoting or Administering Religious Activities; Grantmaking; Advocacy; and Providing Dry-Cleaning & Laundry Services, Personal Care Services, Death Care Services, Pet Care Services, Photofinishing Services, Temporary Parking Services, and Dating Services). Manufacturing Business Survey Committee responses are divided into the following NAICS code categories: Food, Beverage & Tobacco Products; Textile Mills; Apparel, Leather & Allied Products; Wood Products; Paper Products; Printing & Related Support Activities; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Furniture & Related Products; and Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

The ISM® Report On Business® surveys are sent out to Manufacturing and Non-Manufacturing Business Survey Committee respondents the first part of each month. Respondents are asked to ONLY report on information for the current month. ISM® receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses in order to give the most accurate picture of current business activity. ISM® then compiles the report for release on the first and third business day of the following month.

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About Institute for Supply Management®
Institute for Supply Management® (ISM®) serves supply management professionals in more than 90 countries. Its 48,000 members around the world manage about $1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM leads the profession through the ISM Report On Business®, its highly regarded certification programs and the newly launched ISM Mastery Model. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

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