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Economic Growth To Continue In Second Half
Of 1997 Say Purchasing Executives
Forecast Revenue Growth Of 7.0%,
Capacity Utilization 86.4%
Economic growth will be somewhat higher in the second half of 1997,
say the nation's purchasing executives in their 53rd Semiannual
Economic Forecast. While a significant 74% expect their 1997
revenues to be greater than in 1996, they expect a 7.0% net
increase in overall revenues compared to a 5.4% increase predicted
in December 1996, and higher than the 4.9% increase reported for
1996.
These projections are part of the 53rd Semiannual Economic Forecast
issued by the Business Survey Committee of the National Association
of Purchasing Management, Inc. (NAPM). The forecast was presented
today by Norbert J. Ore., C.P.M., chair of the NAPM Business Survey
Committee, and director of purchasing ipd/paper, Sonoco Products
Company. <169>Purchasing executives report a higher level of
optimism for the coming year than they did a year ago with 82%
expecting business in the first half of 1997 to be better than or
the same as the second half of 1996,<170> said Ore. Industries
expecting the greatest improvement over 1996 are--listed in order--
Primary Metals; Electrical Components & Equipment; Glass, Stone &
Aggregate; Petroleum; Food; Furniture; Printing & Publishing;
Transportation & Equipment; Industrial & Commercial Equipment &
Computers; and Leather.
Purchasers report operating at 86.4% of their normal capacity, down
slightly from 86.8% reported in December 1996. Purchasing
executives predict that capital expenditures will increase by 10.1%
in 1997 compared to 1996. Purchasers also forecast that they will
continue to reduce their purchased inventory to sales ratio and
that employment will increase modestly in 1997. Their major
economic concerns are rising interest rates, labor and benefits
costs, inflation, the economy, and a strong dollar.
Purchasers expressed little concern over possible increased
materials costs, stating that prices paid for materials decreased
during the first four months of 1997 by 0.2%. During all of 1997,
they anticipate a 0.7% increase in prices. They also forecast a
2.4% increase in their overall labor and benefits costs for 1997.
Purchasers are predicting modest growth in both their imports and
exports, with exports growing more rapidly than imports. Purchasers
have slightly higher expectations for the U.S. Dollar to gain
strength versus the currencies of major trading partners in the
coming year than they did in December 1996.
Recapping previous NAPM Survey Data, the following information was
found:
--In its 52nd Semiannual Economic Forecast, released December 10,
1996, NAPM's Business Survey Committee predicted the economy would
continue to grow moderately during 1997. They predicted modest
increases in manufacturing employment, stable prices, and continued
growth in imports and exports. They projected nominal revenues
would increase by 5.4% overall in 1996. They also expected labor
and benefits costs to rise 2.8% in 1997.
--On May 1, 1997, the monthly release of the NAPM Report on Business indicated that the manufacturing sector grew for the eleventh consecutive month in April 1997, and at a slightly slower rate of growth than in March. The overall economy grew in April at a slower rate of growth than in March. The growth in April was due largely to increases in Backlog of Orders and Employment. Eighteen of twenty industries reported improvement over March 1997.
--The Purchasing Managers' Index (PMI) in April declined slightly
to 54.2 % from 55.0% in March. Past experience indicates that if
the average PMI for all of 1997 equaled the April value that would
be consistent with real gross domestic growth (GDP) of
approximately +3.6% for 1997. Over time, a PMI in excess of 50.0%
generally indicates an expansion in the manufacturing sector, while
a PMI in excess of 43.9% generally indicates an expansion of the
overall economy.
Summary
--Operating Rate is currently 86.4% of normal capacity.
--Capital Spending to increase 10.1% in 1997 over 1996.
--Production Capacity to increase 4.9% during 1997.
--Prices decreased 0.2% since end of 1996.
--Overall 1997 Prices to increase 0.7%.
--Labor & Benefit Costs to increase at a 2.4% rate in 1997.
--Inventory-to-Sales Ratio expected to continue reduction in 1997.
--Slightly higher overall Manufacturing Employment in 1997.
--Dollar expected to remain strong versus major currencies.
--Exports to continue to grow in 1997.
--Imports to continue to grow in 1997.
--Manufacturing Revenues (nominal) to be up by 7.0% in 1997.
--Major concerns: Rising Interest Rates, Costs of Labor and
Benefits, Inflation, The Economy and Strong Dollar.
--Purchasers are more optimistic about the next 12 months than they
were in December 1996.
May 6, 1997
National Association of Purchasing Managers
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