ISM: Manufacturers expect revenues to rise in 2022, from 2021

by Jeff Della Rosa ([email protected]) 304 views 

The manufacturing sector is expected to continue to grow in 2022, but the growth is expected to moderate in the second half of the year as it accelerates in the services sector, according to the Institute for Supply Management (ISM).

The ISM released Monday (Dec. 13) the Semiannual Economic Forecast that shows the U.S. economy will continue to improve in 2022.

According to the ISM report, revenues are projected to rise in 15 of 18 manufacturing industries. Manufacturers are expected to increase capital expenditures by 7.7% in 2022 after they rose by 12.1% in 2021. Sector employment is expected to increase by 1% after increasing 3.3% in 2021.

According to a survey completed by ISM’s Business Survey Committee, expectations for 2022 are positive for the manufacturing sector, with 65% of respondents expecting revenue to rise in 2022, from 2021. Sector revenue is expected to increase by 6.5% in 2022, compared to a 14.1% increase in 2021.

“Manufacturing’s purchasing and supply executives expect to see strong growth in 2022, with business continuing to expand through the second half, though at slightly lower rates,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee. “Respondents expect raw materials pricing pressure to increase in 2022, as well as improved profit margins over (the second half of) 2021. Wages and employment will continue high rates of growth as hiring slows. Manufacturers also predict growth in both exports and imports in 2022.”

Wages and benefit costs are expected to rise an average of 4.7% in 2022, while the U.S. dollar weakens against six of the seven currencies. The dollar is expected to strengthen compared to the Mexican peso. Raw materials prices are projected to rise by 8.2% in the first five months of 2022, with an overall increase of 8.1% for the year. This compares to a 14.5% increase in the prices between the end of 2020 and November 2021.

Manufacturing purchasing and supply executives said their companies are operating at 88.7% of normal capacity, up 0.4 percentage points from May. Manufacturing production capacity rose by 3.5 percentage points in 2021. The capacity is projected to rise by 6.8% in 2022 as manufacturers add employees, number of hours worked, plants or equipment, and experience fewer shutdowns.