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ECONOMIC GROWTH CONTINUES IN 2019

FOR RELEASE: December 10, 2018

Contact:   Kristina M. Cahill
Report On Business® Analyst
ISM, ROB/Research Manager
Tempe, Arizona
480-752-6276, Ext. 3015
E-mail: kcahill@instituteforsupplymanagement.org



Manufacturing Growth Expected in 2019

Revenue to Increase 5.7%

Capital Expenditures to Increase 6%

Capacity Utilization Currently at 85.2%

Non-Manufacturing Growth Projected in 2019

Revenue to Increase 3.7%

Capital Expenditures to Increase 3.4%

Capacity Utilization Currently at 88.4%

(Tempe, Arizona)- Economic growth in the United States will continue in 2019, say the nation’s purchasing and supply management executives in the December 2018 Semiannual Economic Forecast. Expectations are for a continuation of the growth that began in mid-2009, as indicated in the monthly ISM® Report On Business®. The manufacturing sector is optimistic about growth in 2019, with revenues expected to increase in 17 manufacturing industries, and the non-manufacturing sector also indicates that 17 of its industries will see higher revenues. Capital expenditures, a major driver in the U.S. economy, are expected to increase by 6 percent in the manufacturing sector and increase by 3.4 percent in the non-manufacturing sector. Manufacturing expects that its employment base will grow by 2.4 percent, while non-manufacturing expects employment growth of 2 percent.

These projections are part of the forecast issued by the Business Survey Committee of Institute for Supply Management® (ISM®). The forecast was released today by Timothy R. Fiore, CPSM, C.P.M, chair of the ISM Manufacturing Business Survey Committee, and by Anthony S. Nieves, CPSM, C.P.M., A.P.P, CFPM, chair of the ISM Non-Manufacturing Business Survey Committee.

Manufacturing Summary

Expectations for 2019 are positive, as 64 percent of survey respondents expect revenues to be greater in 2019 than in 2018. The panel of purchasing and supply executives expects a 5.7 percent net increase in overall revenues for 2019, compared to a 5.1 percent increase predicted for 2018 over 2017 revenues. The 17 manufacturing industries expecting revenue improvement in 2019 over 2018 — listed in order — are: Miscellaneous Manufacturing; Wood Products; Fabricated Metal Products; Printing & Related Support Activities; Primary Metals; Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Transportation Equipment; Furniture & Related Products; Chemical Products; Electrical Equipment, Appliances & Components; Paper Products; Computer & Electronic Products; Textile Mills; Machinery; Food, Beverage & Tobacco Products; and Plastics & Rubber Products.

“Manufacturing purchasing and supply executives expect to see growth in 2019. They are optimistic about their overall business prospects for the first half of 2019, with business continuing to expand through the second half of 2019," says Fiore. "In 2018, manufacturing experienced 12 straight months of growth from December 2017 through November 2018, resulting in an average PMI® of 59.2 percent, as compared to 57 percent for the 12 months ending November 2017, as reported in the monthly Manufacturing ISM Report On Business®. Respondents expect raw materials pricing pressures in 2019 to increase, and expect their profit margins will improve in 2019 over 2018. Manufacturers are also predicting growth in both exports and imports in 2019.”

In the manufacturing sector, respondents report operating at 85.2 percent of their normal capacity, down 0.6 percentage point from the 85.8 percent reported in May 2018. Purchasing and supply executives predict that capital expenditures will increase by 6 percent in 2019 over 2018, compared to the 13.4 percent increase reported for 2018 over 2017. Manufacturers have an expectation that employment in the sector will grow by 2.4 percent in 2019 relative to December 2018 levels, while labor and benefit costs are expected to increase an average of 2.5 percent in 2019. Respondents also expect the U.S. dollar to strengthen against all seven currencies of major trading partners in 2019, as was the case in 2018.

The panel predicts the prices paid for raw materials will increase by 3.5 percent during the first five months of 2019, with an overall increase of 3.3 percent for 2019. This compares to a reported 2 percent increase in raw materials prices for 2018 compared with 2017.

Special questions were asked of our panel. See end of report.

Non-Manufacturing Summary

Fifty-seven percent of non-manufacturing supply management executives expect their 2019 revenues to be greater than in 2018. They currently expect a 3.7 percent net increase in overall revenues for 2019 compared to a 4.5 percent increase reported for 2018 over 2017 revenues. The 17 industries expecting increases in revenues in 2019 — listed in order of percentage increase — are: Real Estate, Rental & Leasing; Information; Mining; Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Construction; Professional, Scientific & Technical Services; Wholesale Trade; Health Care & Social Assistance; Retail Trade; Accommodation & Food Services; Transportation & Warehousing; Finance & Insurance; Utilities; Other Services; Educational Services; and Arts, Entertainment & Recreation.

“Non-manufacturing supply managers report operating at 88.4 percent of their normal capacity, higher than the 85.5 percent reported in May 2018. They are optimistic about continued growth in the first half of 2019 compared to the second half of 2018, with a projected increase in growth rate for capital reinvestment,” says Nieves. “They forecast that their capacity to produce products and provide services will rise by 2.9 percent during 2019, and capital expenditures will increase by 3.4 percent from 2018 levels. Non-manufacturers also predict their employment will increase by 2 percent during 2019.”

Respondents in non-manufacturing industries expect the prices they pay for materials and services will increase by 3.6 percent during 2019. They also forecast that their overall labor and benefit costs will increase 3.2 percent in 2019. Profit margins are reported to have increased in the second and third quarters of 2018, and respondents expect them to increase between now and May 2019.

Special questions were asked of our panel. See end of report.

Operating Rate

Manufacturing


Manufacturing purchasing and supply executives report their companies are currently operating at 85.2 percent of normal capacity. This is a 0.6 percentage point decrease when compared to May 2018 (85.8%), and also a decrease when compared to December 2017 (85.8%). The following 12 industries — listed in order — are operating at or above the average rate of 85.2 percent: Apparel, Leather & Allied Products; Wood Products; Petroleum & Coal Products; Paper Products; Textile Mills; Machinery; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Computer & Electronic Products; Fabricated Metal Products; Transportation Equipment; and Nonmetallic Mineral Products.

Non-Manufacturing


Non-manufacturing supply executives report their organizations are currently operating at 88.4 percent of normal capacity. This is higher than the 85.5 percent reported in May 2018, and lower than the 91.9 percent reported in December 2017. Considering the production capacity increases reported in the following section of this forecast, this indicates that non-manufacturing industries are continuing to add capacity, but also find it necessary to maintain their capacity utilization at a relatively high level. The 10 industries operating at or above the average capacity level of 88.4 percent — listed in order — are: Transportation & Warehousing; Educational Services; Other Services; Real Estate, Rental & Leasing; Retail Trade; Agriculture, Forestry, Fishing & Hunting; Public Administration; Professional, Scientific & Technical Services; Finance & Insurance; and Information.

Operating Rate
SomethingManufacturingNon-Manufacturing
  Dec 2017 May 2018 Dec 2018 Dec 2017 May 2018 Dec 2018
90%+ 50% 47% 57% 58% 52% 65%
50% - 90% 49% 51% 43% 40% 45% 33%
Below 50% 1% 2% 0% 2% 3% 2%
Est. Overall Average 85.8% 85.8% 85.2% 91.9% 85.5% 88.4%

Production Capacity

Manufacturing


Production capacity in manufacturing increased 4 percent in 2018, as 44 percent of purchasing and supply executives reported an average capacity increase of 9.9 percent, 5 percent reported an average decrease of 7.2 percent, and 51 percent reported no change. This compares to a predicted increase in production capacity of 4.9 percent for 2018 made in May 2018. Expectations for 2019 are for an increase of 4.7 percent. The 16 industries that report achieving an increase in production capacity in 2018 — listed in order — are: Wood Products; Primary Metals; Electrical Equipment, Appliances & Components; Machinery; Chemical Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Nonmetallic Mineral Products; Fabricated Metal Products; Computer & Electronic Products; Transportation Equipment; Textile Mills; Apparel, Leather & Allied Products; Furniture & Related Products; and Petroleum & Coal Products.

Manufacturing Production Capacity
SomethingPredicted For 2018Reported For 2018Predicted For 2019
  Predicted May 2018 Magnitude of Change Reported Dec 2018 Magnitude of Change Predicted Dec 2018 Magnitude of Change
Higher 43% +13.3% 44% +9.9% 49% +10.2%
Same 54% NA 51% NA 49% NA
Lower 3% -29.6% 5% -7.2% 2% -11.3%
Net Average   +4.9%   +4.0%   +4.7%

The principal means of achieving increases in production capacity in 2018 were (in order of importance):

  1. More hours worked with existing personnel
  2. Additional personnel (permanent, temporary or contract)
  3. Additional plant and/or equipment
  4. Replaced equipment with technically advanced equipment

Non-Manufacturing


The capacity to produce products or provide services in the non-manufacturing sector increased 2.4 percent during 2018. This compares to the 2.9 percent increase reported in December 2017 for the year 2017, and is less than the May 2018 prediction of a 3.8 percent increase for 2018. For 2019, an increase of 2.9 percent is predicted. For 2018, 31 percent of non-manufacturing supply managers indicate increases averaging 9.1 percent, and 4 percent of respondents indicate decreases averaging 12.1 percent. Sixty-five percent saw no change in their capacity. The 15 industries reporting increases in capacity in 2018 — listed in order — are: Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Construction; Information; Public Administration; Wholesale Trade; Utilities; Retail Trade; Management of Companies & Support Services; Health Care & Social Assistance; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Finance & Insurance; Other Services; and Transportation & Warehousing.

Non-Manufacturing Production or Provision Capacity
SomethingPredicted For 2018Reported For 2018Predicted For 2019
  Predicted May 2018 Magnitude of Change Reported Dec 2018 Magnitude of Change Predicted Dec 2018 Magnitude of Change
Higher 24% +16.6% 31% +9.1% 36% +8.1%
Same 75% NA 65% NA 63% NA
Lower 1% -8.3% 4% -12.1% 1% -4.5%
Net Average   +3.8%   +2.4%   +2.9%

The principal means of achieving increases in production capacity in 2018 were (in order of importance):

  1. Additional personnel (permanent, temporary or contract)
  2. More hours worked with existing personnel
  3. Additional plant and/or equipment
  4. Replaced equipment with technically advanced equipment

Capital Expenditures - 2018 vs 2017

Manufacturing


Purchasing and supply managers’ report 2018 capital expenditures increased 13.4 percent on average when compared to 2017 levels. The actual expenditures for 2018 were above survey respondents’ previous expectations, as they predicted an increase of 10.1 percent for 2018 in May 2018. The 46 percent of purchasers who reported increased capital expenditures in 2018 indicated an average increase of 34.8 percent, while the 6 percent who said their capital spending was reduced reported an average decrease of 42 percent. Forty-eight percent of respondents said they spent the same in 2018 as in 2017. The 16 industries showing increases in capital expenditures for 2018 — listed in order of percentage increase — are: Wood Products; Primary Metals; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Transportation Equipment; Plastics & Rubber Products; Nonmetallic Mineral Products; Chemical Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Fabricated Metal Products; Paper Products; Machinery; Apparel, Leather & Allied Products; Textile Mills; and Computer & Electronic Products.

Non-Manufacturing


Non-manufacturing supply management executives report their level of capital expenditures in 2018 increased 2.8 percent compared to 2017. This is less than the 7 percent increase reported for 2017 one year ago, and less than the 6.8 percent increase predicted by respondents in May 2018. Forty-three percent report increases averaging 13.2 percent. An additional 11 percent report decreases averaging 24.7 percent. Forty-six percent indicate they spent the same on capital expenditures in 2018 as in 2017. The 11 industries experiencing increases in capital expenditures in 2018 — listed in order — are: Transportation & Warehousing; Real Estate, Rental & Leasing; Information; Public Administration; Wholesale Trade; Accommodation & Food Services; Mining; Finance & Insurance; Construction; Utilities; and Retail Trade.

Capital Expenditures 2018 vs 2017
SomethingManufacturingNon-Manufacturing
  Predicted
May 2018
Reported
Dec 2018
Magnitude of Change Predicted
May 2018
Reported
Dec 2018
Magnitude of Change
Higher 34% 46% +34.8% 29% 43% +13.2%
Same 52% 48% NA 64% 46% NA
Lower 14% 6% -42.0% 7% 11% -24.7%
Net Average +10.1%   +13.4% +6.8%   +2.8%

Predicted Capital Expenditures - 2019 vs 2018

Manufacturing


Purchasing and supply executives expect capital expenditures to increase 6 percent in 2019. The 41 percent of respondents who predict increased capital expenditures in 2019 indicate an average increase of 32.5 percent, while the 19 percent who said their capital spending would be reduced predict an average decrease of 38.2 percent. Forty percent said they expect to spend the same in 2019 as in 2018. The 12 industries predicting increases in capital expenditures for 2019 — listed in order of percentage increase — are: Wood Products; Primary Metals; Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Machinery; Fabricated Metal Products; Chemical Products; Computer & Electronic Products; Paper Products; and Plastics & Rubber Products.

Non-Manufacturing


Non-manufacturing purchasing and supply executives are expecting an increase of 3.4 percent in capital expenditures in 2019, more than the increase of 2.8 percent they are reporting for 2018. The 43 percent of respondents expecting to spend more on capital expenditures predict an average increase of 13.8 percent. An additional 15 percent anticipate a decrease averaging 16.7 percent. Forty-two percent expect to spend the same on capital expenditures in 2019 as in 2018. The 15 industries expecting increases in capital expenditures in 2019 — listed in order of percentage increase — are: Transportation & Warehousing; Public Administration; Real Estate, Rental & Leasing; Utilities; Accommodation & Food Services; Professional, Scientific & Technical Services; Finance & Insurance; Retail Trade; Construction; Mining; Arts, Entertainment & Recreation; Management of Companies & Support Services; Educational Services; Health Care & Social Assistance; and Other Services.

Predicted Capital Expenditures 2019 vs 2018
SomethingManufacturingNon-Manufacturing
  Predicted Dec 2018 Magnitude of Change Predicted Dec 2018 Magnitude of Change
Higher 41% +32.5% 43% +13.8%
Same 40% NA 42% NA
Lower 19% -38.2% 15% -16.7%
Net Average   +6.0%   +3.4%

Prices — Changes Between End of 2017 and End of 2018

Manufacturing


After an earlier forecast in May 2018 of a 5 percent increase in prices paid for raw materials in 2018, survey respondents now report realized price increases averaging 5.1 percent for the year 2018. The 72 percent who say their prices are higher now than at the end of 2017 report an average increase of 7.8 percent, while the 10 percent who report lower prices averaged a 4.4 percent decrease. The remaining 18 percent indicate no change between the end of 2018 and the end of 2017. The 10 industries experiencing above average price increases of 5.1 percent in 2018 — listed in order — are: Textile Mills; Apparel, Leather & Allied Products; Fabricated Metal Products; Wood Products; Machinery; Furniture & Related Products; Plastics & Rubber Products; Paper Products; Chemical Products; and Primary Metals.

Manufacturing Price Changes Between End of 2017 and End of 2018
  Predicted Dec 2017 Magnitude of Change Predicted May 2018 Magnitude of Change Reported Dec 2018 Magnitude of Change
Higher 60% +3.9% 70% +7.3% 72% +7.8%
Same 23% NA 26% NA 18% NA
Lower 17% -3.2% 4% -3.6% 10% -4.4%
Net Average   +1.8%   +5.0%   +5.1%

Non-Manufacturing


As 2018 draws to a close, non-manufacturing supply managers report prices they pay have increased by 2 percent this year. This is slightly less than the 2.1 percent increase they predicted in May 2018, and more than the 2.2 percent increase for 2018 predicted one year ago. Sixty-one percent of purchasers report price increases averaging 5.3 percent. Ten percent of purchasers indicate decreased prices with an average reduction of 12.9 percent, and 29 percent of respondents have not experienced overall price changes this year. The 9 industries reporting price increases above the average of 2 percent in 2018 — listed in order — are: Mining; Transportation & Warehousing; Arts, Entertainment & Recreation; Construction; Real Estate, Rental & Leasing; Information; Public Administration; Accommodation & Food Services; and Professional, Scientific & Technical Services.

 Predicted Dec 2017Magnitude of ChangePredicted May 2018Magnitude of ChangeReported Dec 2018Magnitude of Change
Non-Manufacturing Price Changes Between End of 2017 and End of 2018
Higher 63% +4.5% 53% +4.8% 61% +5.3%
Same 27% NA 38% NA 29% NA
Lower 10% -6.5% 9% -6.0% 10% -12.9%
Net Average   +2.2%   +2.1%   +2.0%

Prices - Predicted Changes Between End of 2018 and May 2019

Manufacturing


Seventy-one percent of purchasing and supply managers expect the prices they pay to increase in early 2019 by an average of 5.9 percent. At the same time, 12 percent anticipate decreases averaging 5.2 percent. Including the 17 percent who expect no change in prices in the first four months of 2019, purchasers expect the net average overall price increase of 3.5 percent. The 10 industries predicting a higher than 3.5 percent average increase in prices paid in the first part of 2019 — listed in order — are: Textile Mills; Transportation Equipment; Wood Products; Primary Metals; Electrical Equipment, Appliances & Components; Machinery; Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Chemical Products; and Petroleum & Coal Products.

Non-Manufacturing


Non-manufacturing survey respondents predict their purchases in the first five months of 2019 will cost an average of 3.2 percent more than at the end of 2018. This is more than the 2 percent increase reported in the preceding section for all of 2018. Sixty-six percent of non-manufacturing respondents predict the prices they pay will increase an average of 5.2 percent in the first part of 2019. Five percent of respondents expect price decreases averaging 5.1 percent. The remaining 29 percent predict no change in prices in the first four months of 2019. The eight industries predicting greater than or equal to the 3.2 percent average increase in prices they expect to pay in the first part of 2019 — listed in order of percentage increase — are: Mining; Transportation & Warehousing; Wholesale Trade; Construction; Information; Public Administration; Accommodation & Food Services; and Management of Companies & Support Services.

Prices - Predicted Changes Between End of 2018 and May 2019
SomethingManufacturingNon-Manufacturing
  Predicted
Dec 2018
Magnitude of Change Predicted
Dec 2018
Magnitude of Change
Higher 71% +5.9% 66% +5.2%
Same 17% NA 29% NA
Lower 12% -5.2% 5% -5.1%
Net Average   +3.5%   +3.2%

Prices - Predicted Price Changes Between End of 2018 and End of 2019

Manufacturing


Respondents predict a net average increase in prices paid of 3.3 percent between December 2018 and December 2019, indicating they expect a slight decrease in prices during the period of May 2019 through December 2019. Sixty-seven percent of respondents expect an average price increase of 6 percent for the full year of 2019, while 11 percent expect an average reduction of 6.1 percent. The remaining 22 percent expect no change in their average prices paid for the year 2019. The 10 industries expecting to receive increases above the predicted average of 3.3 percent by the end of 2019 — listed in order — are: Textile Mills; Primary Metals; Nonmetallic Mineral Products; Wood Products; Machinery; Plastics & Rubber Products; Chemical Products; Petroleum & Coal Products; Apparel, Leather & Allied Products; and Transportation Equipment.

Non-Manufacturing


For all of 2019, non-manufacturing supply management executives expect their prices to increase an average of 3.6 percent. Sixty-nine percent of respondents expect increases averaging 5.7 percent, 7 percent anticipate prices to drop an average of 4.2 percent, and 24 percent foresee no change in prices during the next year. The nine industries expecting greater than the 3.6 percent average price increase by the end of 2019 — listed in order of percentage increase — are: Transportation & Warehousing; Mining; Construction; Information; Management of Companies & Support Services; Accommodation & Food Services; Wholesale Trade; Real Estate, Rental & Leasing; and Arts, Entertainment & Recreation.

Predicted Changes Between End of 2018 and End of 2019
SomethingManufacturingNon-Manufacturing
  Predicted Dec 2018 Magnitude of Change Predicted Dec 2018 Magnitude of Change
Higher 67% +6.0% 69% +5.7%
Same 22% NA 24% NA
Lower 11% -6.1% 7% -4.2%
Net Average   +3.3%   +3.6%

Labor and Benefit Costs - Predicted Rate Change End of 2018 vs. End of 2019

Manufacturing


Purchasing and supply executives expect higher overall labor and benefit costs for 2019. Sixty-four percent of respondents expect increased labor and benefit costs and expect them to grow by an average of 4 percent for all of 2019, while the 3 percent forecasting lower costs see them decreasing by an average of 5.8 percent. Including the 33 percent of respondents who believe costs will remain the same, the overall net rate of increase is expected to be 2.5 percent between the end of 2018 and the end of 2019. The 12 industries expecting to pay an increase of 2.5 percent or greater — listed in order of percentage increase — are: Textile Mills; Apparel, Leather & Allied Products; Furniture & Related Products; Miscellaneous Manufacturing; Primary Metals; Plastics & Rubber Products; Nonmetallic Mineral Products; Fabricated Metal Products; Wood Products; Electrical Equipment, Appliances & Components; Paper Products; and Petroleum & Coal Products.

Non-Manufacturing


Purchasing and supply executives expect a 3.2 percent increase in labor and benefit costs for non-manufacturing industries in 2019. Seventy-one percent of respondents expect such costs to increase by an average of 4.8 percent. Another 2 percent of respondents expect labor and benefit costs to shrink by an average of 7.5 percent, and 27 percent believe costs will remain stable during 2019. The seven industries expecting to pay an increase of 3.2 percent or higher — listed in order of percentage increase — are: Accommodation & Food Services; Transportation & Warehousing; Mining; Management of Companies & Support Services; Wholesale Trade; Construction; and Health Care & Social Assistance.

Labor and Benefit Costs - Predicted Rate Change End of 2018 vs. End of 2019
SomethingManufacturingNon-Manufacturing
  Predicted for 2018
Dec 2017
Predicted for 2019
Dec 2018
Magnitude of Change Predicted for 2018
Dec 2017
Predicted for 2019
Dec 2018
Magnitude of Change
Higher 67% 64% +4.0% 64% 71% +4.8%
Same 29% 33% NA 33% 27% NA
Lower 4% 3% -5.8% 3% 2% -7.5%
Net Average +2.1%   +2.5% +2.6%   +3.2%

Employment — Change in Overall Employment

Manufacturing


ISM's Manufacturing Business Survey Committee members report that manufacturing employment increased 2.9 percent in 2018 relative to 2017, and forecast that employment will increase by 2.4 percent, on average, for the full year of 2019 relative to 2018. Forty-four percent of respondents expect employment to be 6.6 percent higher in 2019, while 8 percent predict employment to be lower by 6.1 percent. The remaining 48 percent of respondents expect their employment levels to be unchanged in 2019. The 15 industries predicting increases in employment in 2019 — listed in order — are: Textile Mills; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Transportation Equipment; Miscellaneous Manufacturing; Primary Metals; Furniture & Related Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Chemical Products; Petroleum & Coal Products; Machinery; and Fabricated Metal Products.

Manufacturing Change in Overall Employment
  Reported for 2018 (since May)
Dec 2018
Magnitude of Change Reported for 2018 (since Dec 2017) Magnitude of Change Predicted for 2019
Dec 2018
Magnitude of Change
Higher 43% +7.0% 50% +8.0% 44% +6.6%
Same 42% NA 34% NA 48% NA
Lower 15% -6.2% 16% -7.3% 8% -6.1%
Net Average   +2.0%   +2.9%   +2.4%

Non-Manufacturing


ISM's Non-Manufacturing Business Survey Committee members report that non-manufacturing employment has increased 1.7 percent since May 2018. They forecast that employment will increase 2 percent by the end of 2019. In the coming year, 49 percent of respondents expect higher levels of employment, 11 percent anticipate lower levels, and 40 percent expect their employment levels to be unchanged. The 16 industries anticipating increases in their employment in 2019 — listed in order — are: Transportation & Warehousing; Accommodation & Food Services; Professional, Scientific & Technical Services; Management of Companies & Support Services; Construction; Mining; Agriculture, Forestry, Fishing & Hunting; Health Care & Social Assistance; Public Administration; Arts, Entertainment & Recreation; Wholesale Trade; Information; Retail Trade; Finance & Insurance; Other Services; and Real Estate, Rental & Leasing.

Non-Manufacturing - Change in Overall Employment
  Reported for 2018 (since May)
Dec 2018
Magnitude of Change Reported for 2018 (since Dec 2017) Magnitude of Change Predicted for 2019
Dec 2018
Magnitude of Change
Higher 43% +5.9% 46% +6.0% 49% +5.6%
Same 42% NA 39% NA 40% NA
Lower 15% -6.3% 15% -9.3% 11% -6.4%
Net Average   +1.7%   +1.3%   +2.0%

Note: A diffusion index above 50 percent would generally indicate an expectation of higher employment; below 50 percent, an expectation of lower employment.

Export Business - Predicted Change for Next Half Year (First Half of 2019)

Manufacturing


The responses for this semiannual report indicate purchasers see increases in new export orders for the first half of 2019. Of the 82 percent of respondents who export, 38 percent predict an increase (37 percent moderate and 1 percent substantial) over the next six months. Ten percent of respondents predict a decrease (9 percent moderate and 1 percent substantial) in their exports, and 52 percent anticipate no change in exports over the next six months. The 14 industries expecting growth in exports during the first half of 2019 — listed in order — are: Apparel, Leather & Allied Products; Wood Products; Miscellaneous Manufacturing; Chemical Products; Fabricated Metal Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Transportation Equipment; Textile Mills; Computer & Electronic Products; Machinery; Electrical Equipment, Appliances & Components; Paper Products; and Plastics & Rubber Products.

Non-Manufacturing


For the first half of 2018, non-manufacturing supply managers who report that their organizations engage in exporting are optimistic concerning their export business. Of the 27 percent of non-manufacturing business survey respondents who report that they export, 38 percent predict an increase (38 percent moderate and 0 percent substantial) over the next six months. Two percent of the respondents expect a decrease in their exports (2 percent moderate and 0 percent substantial), and 60 percent anticipate no change in exports over the next six months. Of the industries that report they export, the 10 industries expecting growth in export business in the first half of 2019 — listed in order — are: Construction; Real Estate, Rental & Leasing; Finance & Insurance; Agriculture, Forestry, Fishing & Hunting; Other Services; Professional, Scientific & Technical Services; Health Care & Social Assistance; Information; Management of Companies & Support Services; and Wholesale Trade.

Predicted Change in Export Business — Next Half Year
SomethingManufacturingNon-Manufacturing
  Predicted For 2018 Predicted For 2019 Predicted For 2018 Predicted For 2019
  First Half of 2018
Predicted Dec 2017
First Half of 2019
Predicted Dec 2018
First Half of 2018
Predicted Dec 2017
First Half of 2019
Predicted Dec 2018
Substantial Increase 2% 1% 0% 0%
Moderate Increase 39% 37% 39% 38%
No Change 51% 52% 49% 60%
Moderate Decrease 8% 9% 7% 2%
Substantial Decrease 0% 1% 5% 0%
Diffusion Index 67.0% 63.7% 64.0% 68.1%

Import Business — Predicted Change for Next Half Year (First Half of 2019)

Manufacturing


Purchasers expect increases in imports in the first half of 2019. Of the 87 percent of purchasers who reported they import, 29 percent predict an increase in their imports over the next six months (26 percent moderate and 3 percent substantial), while 27 percent predict a decrease in imports of materials (25 percent moderate and 2 percent substantial). Forty-four percent of survey respondents expect no change in imports in the first half of 2019. The nine industries expecting growth in imports — listed in order — are: Wood Products; Textile Mills; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Chemical Products; Plastics & Rubber Products; and Fabricated Metal Products.

Non-Manufacturing


Non-manufacturers have lower expectations for the use of imports for the first half of 2019 than they did in December 2017 for the first half of 2018. Of the 48 percent of non-manufacturing organizations who reported they import, 28 percent (26 percent moderate and 2 percent substantial) predict an increase in their imports during the first half of 2019. Seventeen percent of respondents (16 percent moderate and 1 percent substantial) predict a decrease in imports of materials and services. The remaining 55 percent of purchasers expect no change in imports over the next six months. The nine industries expecting growth in imports — listed in order — are: Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Mining; Retail Trade; Management of Companies & Support Services; Transportation & Warehousing; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Construction.

Predicted Change in Import Business — Next Half Year
SomethingManufacturingNon-Manufacturing
  Predicted For 2018 Predicted For 2019 Predicted For 2018 Predicted For 2019
  First Half of 2018
Predicted Dec 2017
First Half of 2019
Predicted Dec 2018
First Half of 2018
Predicted Dec 2017
First Half of 2019
Predicted 2018
Substantial Increase 3% 3% 2% 2%
Moderate Increase 34% 26% 40% 26%
No Change 55% 44% 48% 55%
Moderate Decrease 8% 25% 9% 16%
Substantial Decrease 0% 2% 1% 1%
Diffusion Index 64.8% 50.6% 66.5% 55.2%

Inventory-to-Sales Ratio

Manufacturing


Of the 97 percent of manufacturing purchasers who answered this question, 21 percent anticipate increasing their purchased inventory-to-sales ratio during 2019. An additional 17 percent expect their ratio to drop, and 62 percent see no change. The diffusion index of 52.6 percent suggests the inventory-to-sales ratio will increase in 2019.

Non-Manufacturing


Of the 99 percent of non-manufacturing purchasers who answered this question, 9 percent anticipate increasing their purchased inventory-to-sales ratio during 2019. An additional 4 percent expect their ratio to drop, and 87 percent see no change. The diffusion index of 52.5 percent suggests the inventory-to-sales ratio will increase in 2019.

Predicted Change in Purchased Inventory-to-Sales Ratio
SomethingManufacturingNon-Manufacturing
  For 2018
Predicted
Dec 2017
For 2019
Predicted
Dec 2018
For 2018
Predicted
Dec 2017
For 2019
Predicted
Dec 2018
Greater 16% 21% 11% 9%
Same 67% 62% 83% 87%
Smaller 17% 17% 6% 4%
Diffusion Index 49.5% 52.6% 52.5% 52.2%

Note: A diffusion index above 50 percent would indicate an increase in the inventory-to-sales ratio; below 50 percent, a decrease in the ratio.

U.S. Dollar - Predicted Strength vs. Major Trading Currencies - in 2019 — Manufacturing Only

Manufacturing


Purchasing and supply executives are expecting the U.S. dollar will strengthen in 2019 against all the foreign currencies listed below. The average diffusion index for this forecast is 66.7 percent, an increase of 8.5 percentage points over the December 2017 forecast average of 58.2 percent for 2018.

U.S. Dollar Will Be: Euro Canada $ British Pound Japanese Yen Mexican Peso Korean Won Taiwan $
Stronger than 51.4% 49.3% 53.9% 44.1% 67.0% 30.3% 36.8%
Same as 32.7% 38.3% 33.0% 38.5% 23.7% 53.9% 48.5%
Weaker than 15.9% 12.4% 13.1% 17.4% 9.3% 15.8% 14.7%
Diffusion Index 67.8% 68.4% 70.4% 63.3% 78.9% 57.2% 61.0%

Note: A diffusion index above 50 percent would predict a generally stronger U.S. dollar; below 50 percent, a generally weaker U.S. dollar, with the distance from 50 percent indicative of the predicted strength or weakness.

Business Revenues

Business Revenues Comparison — 2018 vs. 2017

Manufacturing


Summarizing revenues for 2018, 65 percent of respondents say revenue was better than 2017, and that revenues increased an average of 10.2 percent over 2017. Nine percent say their revenues decreased in 2018 by an average of 8.6 percent, and the remaining 26 percent indicate no change. Overall, purchasing and supply executives indicate a net increase of 5.8 percent in business revenues for 2018 over 2017. This is less than the 6.6 percent increase that was forecast in May 2018 for all of 2018, but more than the 5.1 percent increase predicted in December 2017 for all of 2018. The 17 industries reporting increases (highest to lowest) in revenues in 2018 — listed in order — are: Miscellaneous Manufacturing; Wood Products; Apparel, Leather & Allied Products; Fabricated Metal Products; Computer & Electronic Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Furniture & Related Products; Paper Products; Primary Metals; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Machinery; Textile Mills; Chemical Products; and Petroleum & Coal Products.

Manufacturing Business Revenues — 2018 vs. 2017
  Predicted Dec 2017 % Change Predicted May 2018 % Change Reported Dec 2018 % Change
Higher 70% +7.8% 62% +11.6% 65% +10.2%
Same 26% NA 33% NA 26% NA
Lower 4% -7.2% 5% -11.9% 9% -8.6%
Net Average   +5.1%   +6.6%   +5.8%

Non-Manufacturing


Non-manufacturing supply management executives report that business revenues for 2018 have increased compared to 2017 by 4.5 percent. This is more than the 3.2 percent increase predicted in May 2018 for all of 2018. The 58 percent of respondents reporting better business in 2018 than in 2017 estimate an average revenue increase of 8.8 percent. This is in contrast to an average decrease of 6.3 percent reported by the 10 percent of respondents who indicate worse business in 2018. The remaining 32 percent have experienced no change in 2018 from 2017. The 17 industries reporting increases in revenues in 2018 — listed in order — are: Mining; Real Estate, Rental & Leasing; Construction; Professional, Scientific & Technical Services; Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Management of Companies & Support Services; Information; Wholesale Trade; Transportation & Warehousing; Health Care & Social Assistance; Finance & Insurance; Other Services; Utilities; Accommodation & Food Services; Public Administration; and Retail Trade.

Non-Manufacturing Business Revenues — 2018 vs. 2017
  Predicted Dec 2017 % Change Predicted May 2018 % Change Reported Dec 2018 % Change
Higher 59% +11.1% 49% +7.1% 58% +8.8%
Same 31% NA 46% NA 32% NA
Lower 10% -5.7% 5% -7.7% 10% -6.3%
Net Average   +6.0%   +3.2%   +4.5%

Business Revenues Prediction for 2019

Manufacturing


Manufacturing survey respondents forecast that business revenues for 2019 will be stronger than in 2018. The 64 percent of respondents forecasting better business revenues in 2019 than in 2018 estimate an average increase of 10.2 percent in their organizations’ revenues. This is in contrast to an average decrease of 7.6 percent forecast by the 11 percent who predict lower business revenues in 2019. Including the 25 percent who see no change in 2019, the forecast for overall net increase in business revenues for 2019 over 2018 is 5.7 percent. The 17 manufacturing industries expecting revenue improvement in 2019 over 2018 — listed in order — are: Miscellaneous Manufacturing; Wood Products; Fabricated Metal Products; Printing & Related Support Activities; Primary Metals; Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Transportation Equipment; Furniture & Related Products; Chemical Products; Electrical Equipment, Appliances & Components; Paper Products; Computer & Electronic Products; Textile Mills; Machinery; Food, Beverage & Tobacco Products; and Plastics & Rubber Products.

Non-Manufacturing


Non-manufacturing survey respondents forecast that business revenues for 2019 will be improved over 2018 by an average of 3.7 percent. This is less than the 4.5 percent increase reported for 2018, and less than the 6 percent increase predicted one year ago for 2018 revenues over 2017 revenues. The 57 percent of respondents forecasting better business in 2019 than in 2018 estimate an average revenue increase of 7.4 percent. This is in contrast to an average decrease of 5.7 percent forecast by the 8 percent who predict worse business in 2019. The remaining 35 percent see no change in 2019. The 17 industries expecting increases in revenues in 2019 — listed in order of percentage increase — are: Real Estate, Rental & Leasing; Information; Mining; Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Construction; Professional, Scientific & Technical Services; Wholesale Trade; Health Care & Social Assistance; Retail Trade; Accommodation & Food Services; Transportation & Warehousing; Finance & Insurance; Utilities; Other Services; Educational Services; and Arts, Entertainment & Recreation.

Business Revenues - 2019 vs. 2018
SomethingManufacturingNon-Manufacturing
  Predicted Dec 2018 % Change Predicted Dec 2018 % Change
Higher 64% +10.2% 57% +7.4%
Same 25% NA 35% NA
Lower 11% -7.6% 8% -5.7%
Net Average   +5.7%   +3.7%

Profit Margins

Manufacturing


Survey respondents report that profit margins decreased slightly on average during the second and third quarters of 2018, as 29 percent experienced an increase in profit margins, 29 percent had lower margins, and 42 percent reported no change. Overall, expectations are higher between now and May 2019 as 35 percent of respondents forecast better profit margins, 23 percent predict lower profit margins, and 42 percent predict no change. The 13 industries expecting an increase in profit margins through May 2019 — listed in order of percentage increase — are: Wood Products; Printing & Related Support Activities; Primary Metals; Plastics & Rubber Products; Nonmetallic Mineral Products; Chemical Products; Textile Mills; Paper Products; Miscellaneous Manufacturing; Fabricated Metal Products; Machinery; Transportation Equipment; and Computer & Electronic Products.

Non-Manufacturing


Non-manufacturing supply management executives were asked about changes in profit margins their organizations recently experienced and are expecting in the near future. Their responses indicate that 36 percent experienced an increase in profit margins during the second and third quarters of 2018, while 20 percent found smaller profit margins, and 44 percent had no change in margins during the same period. From now through May 2019, 32 percent of supply managers expect improved profit margins, 13 percent expect lower profit margins, and the remaining 55 percent of respondents anticipate no change in their profit margins. The 14 industries expecting an increase in profit margins through May 2019 — listed in order of percentage increase — are: Transportation & Warehousing; Finance & Insurance; Real Estate, Rental & Leasing; Management of Companies & Support Services; Mining; Retail Trade; Agriculture, Forestry, Fishing & Hunting; Other Services; Public Administration; Professional, Scientific & Technical Services; Accommodation & Food Services; Information; Wholesale Trade; and Utilities.

Profit Margins
SomethingManufacturingNon-Manufacturing
  May 2018 through
Dec 2018
Reported
Dec 2018
Dec 2018 through
May 2019
Predicted
Dec 2018
May 2018 through
Dec 2018
Reported
Dec 2018
Dec 2018 through
May 2019
Predicted
Dec 2018
Better 29% 35% 36% 32%
Same 42% 42% 44% 55%
Worse 29% 23% 20% 13%
Diffusion Index 49.9% 56.0% 57.9% 59.4%

Business Comparison

The First Half of 2019 Compared with Last Half of 2018

Manufacturing


Survey respondents are optimistic about the next six months as reflected in a diffusion index of 66.6 percent. Comparing their outlook for the first half of 2019 to the last half of 2018, 46 percent predict it will be better, 13 percent predict it will be worse, and 41 percent expect no change. The 13 industries expecting improvement in the first half of 2019 — listed in order — are: Wood Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Furniture & Related Products; Transportation Equipment; Plastics & Rubber Products; Chemical Products; Primary Metals; Machinery; Computer & Electronic Products; and Fabricated Metal Products.

Non-Manufacturing


The first half of 2019 is predicted to be better than the last half of 2018, according to non-manufacturing purchasing and supply managers. The diffusion index indicating current expectations is 66.8 percent. Forty-five percent of respondents expect the first half of next year to be better than the last half of this year, 11 percent anticipate it will be worse, and 44 percent predict no change. The 14 industries expecting improvement in the first half of 2019 — listed in order — are: Mining; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Finance & Insurance; Retail Trade; Accommodation & Food Services; Real Estate, Rental & Leasing; Transportation & Warehousing; Other Services; Management of Companies & Support Services; Health Care & Social Assistance; Public Administration; Wholesale Trade; and Utilities.

Business — First Half 2019 vs. Last Half 2018
SomethingManufacturingNon-Manufacturing
  Predicted Dec 2018 Predicted Dec 2018
Better 46% 45%
Same 41% 44%
Worse 13% 11%
Diffusion Index 66.6% 66.8%

Note: A diffusion index above 50 percent would generally indicate an expectation of the first half of the coming year being better than the second half of the current year.

The Second Half of 2019 Compared with the First Half of 2019

Manufacturing


Purchasing and supply executives are less optimistic about the second half of 2019 compared to the first half of 2019. The percentage of survey respondents who forecast the second half of 2019 to be better than the first half is 44 percent, while 16 percent expect it to be worse, and 40 percent expect no change. The diffusion index for the second half of 2019 is 64 percent, compared to 66.6 percent for the first half of 2019. The 16 industries predicting improvement in the second half of 2019 — listed in order — are: Wood Products; Printing & Related Support Activities; Furniture & Related Products; Textile Mills; Miscellaneous Manufacturing; Computer & Electronic Products; Apparel, Leather & Allied Products; Paper Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Chemical Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Transportation Equipment; Electrical Equipment, Appliances & Components; and Machinery.

Non-Manufacturing


Non-manufacturing purchasing and supply executives feel more optimistic about the second half of 2019 than for the first half of the year (diffusion index for the second half is 70.4 percent and the first half is 66.8 percent). The percentage of respondents who currently forecast the second half of 2019 to be better than the first half is 47 percent, while 6 percent expect it to be worse. An additional 47 percent of purchasers expect no change. The 16 industries expecting improvement in the second half of 2019 — listed in order — are: Mining; Retail Trade; Information; Other Services; Professional, Scientific & Technical Services; Real Estate, Rental & Leasing; Accommodation & Food Services; Finance & Insurance; Transportation & Warehousing; Management of Companies & Support Services; Public Administration; Wholesale Trade; Arts, Entertainment & Recreation; Construction; Utilities; and Health Care & Social Assistance.

Business — Second Half 2019 vs. First Half 2019
SomethingManufacturingNon-Manufacturing
  Predicted Dec 2018 Predicted Dec 2018
Better 44% 47%
Same 40% 47%
Worse 16% 6%
Diffusion Index 64.0% 70.4%

Note: A diffusion index above 50 percent would generally indicate an expectation of the second half of the coming year being better than the first half.

Outlook for the Next 12 Months

Manufacturing


Compared to the outlook for 2018 reported in December 2017, survey respondents this year are less optimistic about the outlook for 2019. Forty-eight percent of respondents believe 2019 will be better than 2018. Thirty-six percent of respondents believe 2019 will be the same as 2018, and 16 percent believe 2019 will be worse than 2018. The resulting diffusion index for the outlook for 2019 is 65.8 percent, compared with 81.5 percent for 2018 from one year ago.

Non-Manufacturing


Non-manufacturing survey respondents are overall less optimistic on their outlook, compared to their predictions for 2018. A smaller proportion of respondents this year believe 2019 will be better than 2018 and the same proportion of respondents believe 2019 will be worse than 2018, the diffusion index looking forward into 2019 is lower than the diffusion index looking forward into 2018.

Outlook — Next 12 Months
SomethingManufacturingNon-Manufacturing
  Predicted for 2018 Dec 2017 Predicted for 2019 Dec 2018 Predicted for 2018 Dec 2017 Predicted for 2019 Dec 2018
Better 67% 48% 57% 45%
Same 29% 36% 33% 45%
Worse 4% 16% 10% 10%
Diffusion Index 81.5% 65.8% 73.5% 67.7%

Special Question Topic #1: HIRING WORKERS TO FILL OPEN POSITIONS


We asked the panel, “In the past 6 months, has your firm had difficulty hiring workers to fill open positions?”

Respondents indicated:

Hiring Workers to Fill Open Positions
SomethingManufacturingNon-Manufacturing
SomethingReported
Dec 2017*
Reported
May 2018
Reported
Dec 2018
Reported
Dec 2017*
Reported
May 2018
Reported
Dec 2018
We have had difficulty 65.7% 77.9% 78.5% 65.0% 64.4% 72.8%
We have not had difficulty 34.3% 22.1% 21.5% 35.0% 35.6% 27.2%

*Rebased to those who did or did not have difficulty.

Special Question Topic #2: WAGE INCREASES TO RECRUIT NEW HIRES


We asked the panel, “In the past 6 months, has your firm raised wages to recruit new hires?”

Respondents indicated:

Wage Increases to Recruit New Hires
SomethingManufacturingNon-Manufacturing
SomethingReported
Dec 2017*
Reported
May 2018
Reported
Dec 2018
Reported
Dec 2017*
Reported
May 2018
Reported
Dec 2018
Yes 45.4% 53.3% 56.7% 39.5% 35.7% 56.9%
No 54.5% 46.7% 43.3% 60.5% 64.3% 43.1%

*Rebased to those who did or did not raise wages

Special Question Topic #3: ADDITIONAL TRAINING FOR NEW HIRES


We asked the panel, “In the past 6 months, has your firm offered additional training for new hires?”

Respondents indicated:

Additional Training for New Hires
SomethingManufacturingNon-Manufacturing
SomethingReported
Dec 2017*
Reported
May 2018
Reported
Dec 2018
Reported
Dec 2017*
Reported
May 2018
Reported
Dec 2018
Yes 46.9% 47.9% 49.5% 56.1% 50.0% 48.4%
No 53.1% 52.1% 50.5% 43.9% 50.0% 51.6%

*Rebased to those who did or did not offered training

Special Question Topic #4 & #5: CAPITAL SPENDING PLANS


We asked the panel, “In the past 6 months, has your firm increased, decreased or left unchanged its capital spending plans for the next 12 months? And, why did you say so?”

Respondents indicated:

Capital Spending Plans
SomethingManufacturingNon-Manufacturing
SomethingReported
May 2018
Reported
Dec 2018
Reported
May 2018
Reported
Dec 2018
Increased capital spending plans 35.5% 36.4% 31.4% 38.5%
No change to capital spending plans 52.8% 49.0% 58.5% 45.8%
Decreased capital spending plans 11.7% 14.6% 10.1% 15.6%
Increased Capital Spending Plans
SomethingManufacturingNon-Manufacturing
SomethingReported
May 2018
Reported
Dec 2018
Reported
May 2018
Reported
Dec 2018
Expected or recently enacted regulatory reform 2.2% 4.4% 3.4% 4.4%
General business outlook 68.9% 73.6% 57.6% 55.9%
Recent business tax reform 14.4% 7.4% 18.6% 19.1%
Uncertainty about trade policy 0.0% 1.6% 0.0% 0.0%
Other 14.4% 13.0% 18.6% 20.6%
Decreased Capital Spending Plans
SomethingManufacturingNon-Manufacturing
SomethingReported
May 2018
Reported
Dec 2018
Reported
May 2018
Reported
Dec 2018
Expected or recently enacted regulatory reform 3.4% 6.0% 5.3% 16.7%
General business outlook 51.8% 50.0% 57.9% 50.0%
Recent business tax reform 3.4% 0.0% 0.0% 4.2%
Uncertainty about trade policy 0.0% 17.6% 0.0% 0.0%
Other 41.4% 26.3% 36.8% 29.2%

Special Question Topic #6: TARIFFS


In May 2018, we asked the panel “If you believe that tariffs will raise the price of your goods to your customers, by how much?” For this forecast, we asked the panel “Have the recently enacted or proposed tariffs on input materials led you to raise the price of goods that you produce and deliver to your customers? And, if ‘yes’, by what percentage?”

Respondents indicated:

Tariffs Will Lead/Led to Higher Prices
SomethingManufacturingNon-Manufacturing
SomethingReported
May 2018
Reported
Dec 2018
Reported
May 2018
Reported
Dec 2018
Yes 73.9% 51.9% 50.3% 23.6%
No 26.1% 48.1% 49.7% 76.4%
If “Yes,” Average Increase 5.4% 6.1% 7.2% 5.3%

Special Question Topic #7: TARIFFS


In April 2018, we asked the panel “Do you believe that tariffs will cause delays and disruptions in your supply chain?” For this forecast, we asked the panel “Are input material tariffs impacting your supply chain's ability to deliver?”

Respondents indicated:

TARIFFS
SomethingManufacturingNon-Manufacturing
SomethingReported
May 2018
Reported
Dec 2018
Reported
May 2018
Reported
Dec 2018
Yes 57.5% 36.4% 59.0% 27.7%
No 42.5% 63.6% 41.0% 72.3%

Special Question Topic #8: TARIFFS

Manufacturing


We asked the panel “Are current or potential counter tariffs affecting your company’s ability to export products and meet your revenue goals?” Manufacturing respondents indicated:

  • Yes: 27.2%
  • No: 72.8%

Non-Manufacturing


We asked the panel, “Are current or potential counter tariffs affecting your company’s ability to export products and meet your revenue goals?” Non-Manufacturing respondents indicated:

  • Yes: 8.5%
  • No: 91.5%

Special Question Topic #9: TARIFFS

Manufacturing


We asked the panel, “Is your company evaluating new sources of supply and changes to your existing manufacturing footprint as a result of U.S. tariffs?” Manufacturing respondents indicated:

  • Yes: 65.2%
  • No: 34.8%

Non-Manufacturing


We asked the panel, “Is your company evaluating new sources of supply and changes to your existing non manufacturing footprint as a result of U.S. tariffs?” Non Manufacturing respondents indicated:

  • Yes: 36.4%
  • No: 63.6%

Special Question Topic #10:

Manufacturing


We asked the panel, “Is your company evaluating new sources of supply and changes to your existing manufacturing footprint as a result of counter tariffs?” Manufacturing respondents indicated:

  • Yes: (47.9%)
  • No: (52.1%)

Non-Manufacturing


We asked the panel, “Is your company evaluating new sources of supply and changes to your existing non manufacturing footprint as a result of counter tariffs?” Non Manufacturing respondents indicated:

  • Yes: (25.7%)
  • No: (74.3%)

Summary

Manufacturing


The manufacturing sector is currently expanding, and the forecast indicates that it will continue to expand in the first half of 2019, and expand at a slightly lower rate in the second half of 2019.

  • Operating rate is currently at 85.2 percent.
  • Production capacity increased by 4 percent in 2018.
  • Production capacity is expected to increase by 4.7 percent in 2019.
  • Capital expenditures increased 13.4 percent in 2018.
  • Capital expenditures are expected to increase 6 percent in 2019.
  • Prices paid increased 5.1 percent in 2018.
  • Overall, 2019 prices paid are expected to increase 3.3 percent.
  • Labor and benefit costs are expected to increase 2.5 percent in 2019
  • Manufacturing employment is expected to increase 2.4 percent in 2019.
  • Expect growth in U.S. exports in 2019.
  • Expect growth in U.S. imports in 2019.
  • Manufacturing revenues are up 5.8 percent in 2018.
  • Manufacturing revenues are expected to increase 5.7 percent in 2019
  • The U.S. dollar is expected to strengthen versus all major trading partner currencies in 2019.
  • Overall, manufacturing supply managers have an optimistic outlook, with 84 percent of respondents predicting 2019 will be the same as or better than 2018.

Non Manufacturing


The non-manufacturing sector continues to expand, and the forecast indicates an increased rate of expansion in 2019.

  • Operating rate is currently at 88.4 percent.
  • Production capacity increased 2.4 percent in 2018.
  • Production and provision capacity is expected to increase 2.9 percent in 2019.
  • Capital expenditures increased 2.8 percent in 2018.
  • Capital expenditures are expected to increase 3.4 percent in 2019.
  • Prices paid increased 2 percent in 2018.
  • Prices paid are expected to increase 3.6 percent in 2019.
  • Labor and benefit costs are expected to increase 3.2 percent in 2019.
  • Employment is expected to increase 2 percent in 2019.
  • Expect export levels to increase in 2019.
  • Expect import growth in 2019.
  • Non-manufacturing revenues are up 4.5 percent in 2018.
  • Non-manufacturing revenues are expected to rise up 4.5 percent in 2019.
  • Overall, non-manufacturing supply managers have a mostly positive outlook, with 90 percent of respondents predicting 2019 will be the same as or better than 2018.

*Miscellaneous Manufacturing includes items such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies.

*Other Services include services such as equipment and machinery repairing; promoting or administering reigious activities; grant making; advocacy; and providing dry-cleaning and laundry services, personal care services, death care services, pet care services, photofinishing services, temporary parking services, and dating services.

About This Report

The data presented herein is obtained from a survey of manufacturing and non-manufacturing supply executives nationwide 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

In addition to this forecast, the Manufacturing ISM® Report On Business® is issued monthly and is considered by many economists to be the most reliable near-term economic barometer available. It is reviewed regularly by government agencies and economic business leaders. The report, compiled from responses to questions asked of purchasing and supply executives across the country, tracks industrial production, new orders, inventories, supplier deliveries, imports, exports, backlog of orders, employment, customers' inventories, buying policies and prices. The report has been issued by the association since 1931, except during World War II. Results shown for Manufacturing are based on data compiled from all manufacturing sub-sectors: 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).

Covering the non-manufacturing sector, ISM debuted the Non-Manufacturing ISM® Report On Business® in June 1998. The Non-Manufacturing ISM Report On Business® is released on the third business day of each month, and is based on data received from purchasing and supply executives across the country. The report covers business activity, new orders, backlog of orders, new export orders, inventory change, inventory sentiment, imports, prices, employment, and supplier deliveries. Results shown for Non-Manufacturing are based on data compiled from all non-manufacturing sectors: 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).

The industries reporting growth, as indicated in the Manufacturing and Non-Manufacturing ISM® Report On Business® monthly reports, and in this semiannual forecast, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

The Manufacturing and Non-Manufacturing ISM® Report On Business® is published monthly by the Institute for Supply Management®, the first supply institute in the world. Founded in 1915, ISM's mission is to enhance the value and performance of procurement and supply chain management practitioners and their organizations worldwide. By executing and extending its mission through education, research, standards of excellence and information dissemination — including the renowned monthly ISM® Report On Business® — ISM maintains a strong global influence among individuals and organizations. ISM is a not-for-profit educational association that serves professionals with an interest in supply management who live and work in more than 80 countries. ISM offers the Certified Professional in Supply Management® (CPSM®) and Certified Professional in Supplier Diversity® (CPSDTM) qualifications.

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The next Manufacturing ISM® Report On Business® featuring the December 2018 data will be released at 10:00 a.m. ET on Thursday, January 3, 2019..

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