Consensus National Futures and Financial On Line Index
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SEMIANNUAL ECONOMIC FORECAST
Economic Growth To Increase In 1998
Say Purchasing Executives; Forecast
Revenue Growth Of 7.8%, Capacity Utilization at 86.4%
Economic growth will be higher in 1998, say the nation's purchasing executives in their 54th Semiannual Economic Forecast. A significant 81% expect their 1998 revenues to be greater than in 1997. They expect a 7.8% net increase in overall revenues compared to a 7.2% increase reported for 1997. Industries expecting the greatest improvement over 1997 are<197<\>listed in order–Paper; Electronic Components & Equipment; Glass, Stone & Aggregate; Instruments & Photographic Equipment; Chemicals; Rubber & Plastic Products; Industrial & Commercial Equipment & Computers; Fabricated Metals; Apparel; Textiles; and Food.
These projections are part of the 54th 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., chairman of the NAPM Business Survey Committee and corporate purchasing manager, Sonoco Products Company. “Purchasing executives report a higher level of optimism for the coming year than they did a year ago with 88% of them expecting business in the first half of 1998 to be better than or the same as the second half of 1997,” said Ore.
Purchasers report operating at 86.4% of their normal capacity, the same as reported in May 1997. Purchasing executives predict that capital expenditures will increase by 14.9% in 1998 compared to 1997. Purchasers also forecast that they will continue to reduce their purchased inventory to sales ratio and that manufacturing employment will continue to increase in 1998. Their major economic concerns are labor and benefit costs, a weak economy, inflation, the strong dollar, and higher interest rates.
While purchasers express concerns about inflation and interest rates, they predict that prices they pay for materials will increase by 0.3% during the first four months of 1998 and will be up an additional 0.3% for a total of 0.6% for the balance of the year. They report that overall prices paid for purchases have increased a negligible 0.1% during the full year 1997. They also forecast a 3.1% increase in their overall labor and benefits costs for 1998. Purchasers are predicting continued growth in both their imports and exports, with exports growing more rapidly than imports. Purchasers expect the U.S. Dollar to gain strength versus the currencies of major trading partners.
Recapping previous NAPM Survey Data, the following information was found:
–In its 53rd Semiannual Economic Forecast, released May 6, 1997, NAPM's Business Survey Committee predicted the economy would continue to grow during the balance of 1997. They predicted increased employment, increased capital investment, stable prices, and they projected nominal revenues would increase by 7.0% overall in 1997. They also expected labor and benefits costs to rise moderately in 1997.
197>On December 1, 1997, the monthly release of the NAPM Report on Business indicated that the manufacturing sector grew for the eighteenth consecutive month, but at a slightly slower rate of growth than in October 1997. The overall economy grew in November for the seventy-ninth consecutive month. Industries reporting the highest rates of improvement over October were: Furniture; Petroleum; Food; Primary Metals; Rubber & Plastic Products; Transportation & Equipment; Paper; Chemicals; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Fabricated Metals; and Textiles.
–The Purchasing Managers' Index (PMI) in November registered growth in the manufacturing sector at 54.4%, down slightly from 56.0% in October. Past experience indicates that if the average PMI for all of 1997 equaled the November value it would be consistent with real gross domestic product (GDP) growth of approximately +3.7% 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 14.9% in 1998 over 1997.
–Production Capacity to increase 5.3% during 1998.
–Prices increased 0.1% since end of 1996.
–Overall 1998 Prices to increase 0.6%.
–Labor & Benefit Costs to increase at a 3.1% rate in 1998.
–Lower Inventory-to-Sales Ratio expected in 1998.
–Manufacturing Employment to increase in 1998.
–U.S. Dollar expected to gain strength versus major currencies.
–Exports to continue to grow in 1998.
–Imports to continue to grow in 1998.
–Christmas Retail Sales to be more robust than in 1996.
–Manufacturing Revenues (nominal) up by 7.2% for 1997.
–Manufacturing Revenues (nominal) predicted to be up by 7.8% in 1998.
–Optimism for 1998–slightly higher for first half than second half.
–Major concerns: Labor/Benefits, the Economy, Inflation, Strong Dollar, and Rising Interest Rates.
–Purchasers are less concerned about the next 12 months than they were in May 1997.
December 9, 1997 National Association of Purchasing Managers
Consensus National Futures and Financial On Line Index
Hosted by:
One Crossroads Place
610 West Maple Ave, Suite WWW
Independence, MO 64050
(816) 252-4080
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