Expect Further Recovery in Second Half of 2002, Say Purchasing and Supply Execs

June 7, 2002
Economic growth will continue in the second half of 2002, according to the nation's purchasing and supply executives in their 63rd Semiannual Forecast.

Economic growth will continue in the second half of 2002, according to the nation's purchasing and supply executives in their 63rd Semiannual Forecast.

These projections are part of the forecast issued by the Business Survey Committees of the Institute for Supply Management Inc. (ISM). The forecast was presented May 7 by Norbert J. Ore., chair of the ISM Manufacturing Business Survey Committee and group director, strategic sourcing and procurement, Georgia-Pacific Corp.

Purchasing and supply executives expect their 2002 revenues to grow modestly from 2001 as they now anticipate 2.8 percent growth in revenues. Manufacturing industries expecting the greatest improvement over 2001 are — listed in order — Wood and Wood Products; Textiles; Glass, Stone and Aggregate; Transportation and Equipment; Miscellaneous; Petroleum; Chemicals; Printing and Publishing; Primary Metals; Instruments and Photographic Equipment; Food; and Rubber and Plastic Products.

“Manufacturing purchasing and supply executives are more optimistic than at anytime in the past year and see significant improvement in their organizations' prospects for 2002,” said Ore. “While the manufacturing sector is definitely improving, they now find themselves facing a recovering economy that still generates concerns about the weakness in segments of the economy; labor and benefits costs, including healthcare costs; energy costs; inflation; and import restraints. Capacity utilization below 80 percent discourages capital investment and is reflected in revised spending plans that now predict a decline in year-over-year capital spending.”

In the sector, purchasers report operating at 79.3 percent of their normal capacity, up from 77.5 percent reported in December 2001. They now predict that capital expenditures will decrease 8.7 percent in 2002 compared to the December 2001 prediction of a 14.4 percent decrease. Purchasers also forecast that they will continue to reduce their organization's purchased inventory to sales ratio, while expecting manufacturing employment to decline an additional 0.5 percent. They also forecast an average 2 percent increase in overall labor and benefits costs for 2002. Manufacturing purchasers are predicting growth in exports and imports at accelerating rates, and expect the U.S. dollar to remain strong against the currencies of major trading partners. They predict the prices they pay will increase 2.3 percent from the present until the end of 2002.