Continued Growth Ahead for 2015 says ISM

[responsive]RISI LOGO[/responsive]There are sunny days ahead for U.S. businesses in 2015, with growth in both the manufacturing and non-manufacturing sectors expected to be greater next year than they were in 2014, according to the semiannual forecast from ISM. [i]

“Manufacturing purchasing and supply executives expect to see continued growth in 2015,” writes Bradley Holcomb of ISM. “They are optimistic about their overall business prospects for the first half of 2015, and are similarly optimistic about the second half of 2015.”

(Note: RISI, a leading source of information for the global forest products industry, provided an excellent recap of the 2015 ISM predictions; all stats cited in this article are from the RISI report on the findings. Many in our industry consider RISI information to be highly accurate and reliable; we rely on it heavily in our business plans at Freeport Press.)

First, the good news in a broad sweep, per the RISI report:s=

  • Capital expenditures, traditionally a good indication of economic health, are expected to increase by 3.7% in 2015.
  • Manufacturing revenues are expected to increase by 5.6%, up from this year’s 3.6%.
  • The USD is expected to strengthen against other major currencies.
  • There is an overall optimistic outlook from manufacturing supply managers, with nearly all of them (93%) predicting that 2015 will be as good as or better than 2014.

Among the manufacturing sectors that are seeing the most optimistic predictions are Printing & Related Support Activities and Paper Products, two categories which will likely have impacts on your own business goals and activities.

Operating Capacity Healthy

U.S. companies are currently operating at a healthier 83.7% of normal capacity, a notable increase from December of 2013 (80.3%). In fact, ISM notes that the manufacturing sector is expanding for the 18th consecutive month and predicts this trend will continue.

Production capacity, meanwhile, should rise in 2015 by about 5.6% overall, thanks to additional personnel, more hours worked per person, increases in plant and/or equipment, and upgrading to more technical advanced equipment. This is especially relevant to the printing sector as state-of-the-art technology continues to revolutionize our industry.

Pricing Pressures to Continue

With a growing economy comes its flip side, an increase in pricing pressure. Manufacturing supply managers are predicting they will see prices rise by an average of 3.6% next year, a quicker pace than the 1.7% we saw in 2014. Keep in mind the same group overshot their predictions for price hikes this year (they predicted 2.2%) so the hikes might not be so steep.

Notably, Paper Products are not included in the categories most likely to see costs go up, which may spell some welcome relief to our customers. Printing costs and transportation however, are expected to rise, and the uncertainty continues at the USPS regarding potential postal increases.

To help alleviate the impact of potential price hikes in these categories, talk to your printing and mailing providers to be sure you are maximizing efficiencies wherever possible.

Labor and Benefits Costs to Increase

As the work force continues to rebound and the economy strengthens, overall labor and benefits will likely increase, with 71% of respondents expecting payroll costs to edge up an average of 4.6%. Hiring figures are expected to gain steam also, with 36% of respondents expecting an average of 7.1% higher employment in their companies.

Part of the expected labor cost increase may be due to the fact that 28.8% of respondents say they cannot find enough qualified applicants to fill job openings. As technology continues to advance, companies are looking for more highly skilled workers for many manufacturing positions, especially true in the printing industry. Interestingly, the Printing & Related Support Activities sector expects some of the highest growth in this area, as advances in printing technology demand changes in the prepress and production work force.

Based on these predictions, employee retention and continued training become increasingly important, as the cost of replacing an employee continues to rise.

The Bottom Line

Positive indicators of growth abound in the ISM figures and the RISI report:

  • Capital expenditures are up;
  • Production capacity and operating rates continue to rise;
  • Profit margins grew in Q2 and Q3 of this year;
  • And both imports and exports are showing gains.

This year was one of growth in almost all sectors, with business revenues increasing an average 9.1% over 2013, and predictions are for 9.5% revenue growth in manufacturing (10% in non-manufacturing) for 2015. Close to half of respondents predict that overall profit margins will continue to grow next year.

“Compared to the outlook for 2014 reported in December of 2013, survey respondents this year are more optimistic about the outlook for 2015,” notes the RISI report.

“Fifty-eight percent of respondents believe 2015 will be better than 2014. Only 35% of respondents believe 2015 will be the same as 2014 and just 7% believe 2015 will be worse.”

From all of us at Freeport Press, we wish you and yours a New Year filled with optimism, growth and much success.


[i] The projections cited in this article are part of the semiannual forecast issues by the Business Survey Committee of the Institute for Supply Management (ISM), which surveys purchasing and supply executives across the U.S. ISM forecasts are considered by many economists to be the most reliable near-term economic barometer, RISI notes. Their information is viewed regularly by government agencies and economic business leaders.