Economic Decline to Continue Throughout 2009

TEMPE, Ariz.--Economic decline to continue in the United States throughout the remainder of 2009, say the nation's purchasing and supply executives in their spring 2009 Semiannual Economic Forecast. Expectations for the remainder of 2009 have weakened in both the manufacturing and non-manufacturing sectors.

These projections are part of the forecast issued by the Business Survey Committee of the Institute for Supply Management™ (ISM). The forecast was presented today by Norbert J. Ore, CPSM, C.P.M., chair of the ISM Manufacturing Business Survey Committee; and by Anthony S. Nieves, C.P.M., CFPM, chair of the ISM Non-Manufacturing Business Survey Committee, and senior vice president — supply management, Hilton Hotels Corporation.

Manufacturing Summary

While 15 percent of respondents predict revenues to be 13.7 percent greater in 2009 than in 2008, an overall revenue decrease of 14.7 percent is expected for manufacturing as 67 percent expect a 25.2 percent decline, and 18 percent expect no change. This represents a significant decline in expectations from December 2008 when the panel of supply management executives predicted a 1.1 percent decrease in 2009 revenues compared to 2008. With operating capacity at 67 percent, an expected capital investment decline of 22.7 percent and prices expected to decrease 5.3 percent during 2009, manufacturers will need to focus on cost-cutting to offset lower revenue. “Given the significant decline in activity, 2009 shapes up as a very difficult year for U.S. manufacturers," said Ore.

Food, Beverage & Tobacco Products is the only manufacturing industry expecting a revenue increase in 2009.

Non-Manufacturing Summary

Fifty percent of non-manufacturing purchasing and supply executives expect their 2009 revenues to be lower by 14.5 percent than in 2008. Overall, respondents currently expect a 5.1 percent net decrease in overall revenues, much lower than the 0.7 percent increase that was forecast in December 2008. “2009 continues to be challenging for the non-manufacturing sector, with the steady decline in activity coupled with increasing unemployment,” Nieves said.

Non-manufacturing industries expecting increases in revenue in 2009 are: Finance & Insurance; and Other Services(b).

OPERATING RATE

Manufacturing

Purchasing and supply managers report that their companies are currently operating at 67 percent of normal capacity, representing a decline from the 75.2 percent reported in December 2008 and the 78.6 percent reported in April 2008; and the lowest operating rate on record since the statistic was first tracked by ISM in 1985. This is consistent with the trend of rapid contraction in manufacturing as reported in the monthly Manufacturing ISM Report On Business^®. The following industries are operating at capacity levels at or above the average capacity of 67 percent: Apparel, Leather & Allied Products; Paper Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Miscellaneous Manufacturing(a); Electrical Equipment, Appliances & Components; Chemical Products; and Machinery.

Non-Manufacturing

Non-manufacturing purchasing and supply executives report that their organizations are currently operating at 80.1 percent of normal capacity. This is lower than the 83.1 percent reported in December 2008 and the 85.9 percent reported in April 2008; and the lowest operating rate on record since this statistic was first tracked by ISM in 1998. The following industries are operating at capacity levels above the average rate of 80.1 percent: Mining; Public Administration; Utilities; Health Care & Social Assistance; Real Estate, Rental & Leasing; Information; Transportation & Warehousing; Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Finance & Insurance; Educational Services; and Retail Trade.