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2011 Semiannual Forecast Report

2011 Semiannual Forecast Report. December 6, 2011 ISM Business Survey Committees. Speakers. Bradley J. Holcomb, CPSM, CPSD, chair of the ISM Manufacturing Business Survey Committee Anthony S. Nieves, C.P.M., CFPM, chair of the ISM Non-Manufacturing Business Survey Committee.

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2011 Semiannual Forecast Report

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  1. 2011 Semiannual Forecast Report December 6, 2011 ISM Business Survey Committees

  2. Speakers • Bradley J. Holcomb, CPSM, CPSD, chair of the ISM Manufacturing Business Survey Committee • Anthony S. Nieves, C.P.M., CFPM, chair of the ISM Non-Manufacturing Business Survey Committee

  3. PMI 2002 - November 2011 2002 - November 2011

  4. NMI 2008 - November 2011

  5. Non-Manufacturing Business Activity2002 – November 2011

  6. Current Operating Rate Percent of Normal Capacity • December 2011 79.2% • April 2011 83.2% • December 2010 80.2% • December 2011 85.2% • April 2011 83.7% • December 2010 82.9% Manufacturing Non-Manufacturing

  7. Production Capacity ChangeReported 2011 vs. 2010 Production Capacity Dec 2011 Mfg Non-Mfg + 4.6% + 1.1%

  8. Production Capacity:Manufacturing Principal Means of Achieving Increases in 2011: • Additional plant and/or equipment • More hours worked with existing personnel • Additional personnel (permanent, temporary or contract) • Fewer shutdowns of operations or facilities

  9. Production Capacity: Non-Manufacturing Principal Means of Achieving Increases in 2011: • More hours worked with existing personnel • Additional personnel (permanent, temporary or contract) • Additional plant and/or equipment • Replaced equipment with technically advanced equipment

  10. Production Capacity ChangePredicted For 2012 Predicted Production Capacity Mfg Non-Mfg + 5.6% + 3.2%

  11. Capital Expenditures Actual 2011 vs. 2010 Predicted 2012 vs. 2011 Mfg Non-Mfg + 11.0% + 4.0% Mfg Non-Mfg + 1.9% + 0.1%

  12. Reported Purchase Price Changes Price Changes Mfg Non-Mfg Dec 2011 + 5.7% + 2.8% End 2011 vs. End 2010

  13. December 2011 Predicted Purchase Price Changes Mfg Non-Mfg April 2012 vs. End 2011 + 2.0% + 2.1% End 2012 vs. End 2011 + 2.9% + 2.7%

  14. Predicted Labor and Benefit Costs Labor & Benefit Costs Mfg Non-Mfg Dec 2011 + 2.4% + 1.8% 2012 vs. 2011

  15. Predicted Employment Change End 2012 vs. End 2011 Overall Employment Mfg Non-Mfg Dec 2011 + 1.3% + 1.1%

  16. Exports: Predicted Change FirstHalf 2012 Manufacturing 80.5 78 76 75.5 75.0 74.4 73.0 71.5 69.9 68.5 65.5 63.5 58.4 Note: 80.6% of Manufacturing respondents export

  17. Exports: Predicted Change First Half 2012 Non-Manufacturing 81 76.3 76 75 73 69 69.5 68.9 67.5 65 64 59.1 50 Note: 29.1% of Non-Manufacturing respondents export

  18. Imports: Predicted Change First Half 2012 Manufacturing 80 77.5 77.5 73 68.0 68.8 65.7 66.7 65.5 64 62.9 61.5 48.6 Note: 86.6% of Manufacturing respondents import

  19. Imports: Predicted Change First Half 2012 Non-Manufacturing 80.5 73.5 72.5 68.5 68 63.6 65.5 65.1 62 60.5 58 55.5 51.1 Note: 49.6% of Non-Manufacturing respondents import

  20. Business Revenues (nominal) December 2011 Mfg Non-Mfg Reported 2011 vs. 2010 + 7.0% + 1.5% Predicted 2012 vs. 2011 + 5.5% + 3.1%

  21. Industries Predicting Growth in Revenues 2012 vs. 2011 — Manufacturing Transportation Equipment Paper Products Printing & Related Support Activities Plastics & Rubber Products Food, Beverage & Tobacco Products Primary Metals Fabricated Metal Products Chemical Products Miscellaneous Manufacturing • Computer & Electronic Products • Machinery • Petroleum & Coal Products • Wood Products • Nonmetallic Mineral Products • Electrical Equipment, Appliances & Components • Apparel, Leather & Allied Products • Furniture & Related Products

  22. Industries Predicting Growth in Revenues 2012 vs. 2011 — Non-Manufacturing Transportation & Warehousing Arts, Entertainment & Recreation Accommodation & Food Services Real Estate, Rental & Leasing Finance & Insurance Utilities Public Administration • Professional, Scientific & Technical Services • Mining • Construction • Other Services • Wholesale Trade • Agriculture, Forestry, Fishing & Hunting • Information • Retail Trade

  23. Business in 2012 First Half 2012 vs. Last Half 2011 Mfg Non-Mfg Better 41% 35% Same 43% 50% Worse 16% 15% Diffusion Index 62.5% 60%

  24. Business in 2012 Second Half 2012 vs. First Half 2012 Mfg Non-Mfg Better 39% 37% Same 53% 53% Worse 8% 10% Diffusion Index 65.5% 63.5%

  25. Most Important Issues Facing Business Manufacturing • Poor sales (43.9%) • Government regulations (22%) • Inflation (17.4%) • Cost of labor (4.5%) • Quality of labor (4.5%) • Taxes (4.5%) • Interest rates and finance (3%)

  26. Most Important Issues Facing Business Non-Manufacturing • Poor sales (34.4%) • Government regulations (26.4%) • Inflation (10.4%) • Interest rates and finance (9.6%) • Cost of labor (8.8%) • Taxes (5.6%) • Quality of labor (4.8%)

  27. Supply Chain Improvements 2012 Manufacturing Most Cited Approaches • Supplier performance management • Strategic sourcing/supply base rationalization • Demand planning to reduce supply lead times • Inventory management and control • Process and information systems improvements

  28. Supply Chain Improvements 2012 Non-Manufacturing Most Cited Approaches • Supply management process improvement • Leverage new and existing technology • Contract management • Professional development • Strategic sourcing

  29. Change for 2012 vs. 2011 Predicted Inventory-to-Sales Ratio Mfg Non-Mfg Expect to Increase 17% 13% Expect No Change 54% 68% Expect to Decrease 29% 19% Diffusion Index 44% 47%

  30. Business Outlook Next 12 Months Mfg Non-Mfg Better 46% 44% Same 38% 38% Worse 16% 18% Diffusion Index 65% 63%

  31. Strength of the U.S. Dollar for 2012 Manufacturing Dec 2012 49.2% Dec 2011 44.1% Average Diffusion Index for U.S. Dollar vs. 7 Major Currencies

  32. Reported Profit MarginsApr 2011 – Nov 2011 Mfg Non-Mfg Better 31% 27% Same 32% 37% Worse 37% 36% Diffusion Index 47% 45.5%

  33. Predicted Profit MarginsNov 2011 – Apr 2012 Mfg Non-Mfg Better 40% 32% Same 41% 50% Worse 19% 18% Diffusion Index 60.5% 57%

  34. Summary Manufacturing • Operating rate is currently at 79.2%. • Production capacity increased by 4.6% in 2011. • Production capacity is expected to increase by 5.6% in 2012. • Capital expenditures increased 11% in 2011. • Capital expenditures are expected to increase 1.9% in 2012.

  35. Summary Manufacturingcontinued • Prices paid increased 5.7% in 2011. • Overall 2012 prices paid are expected to increase 2.9%. • Labor and benefit costs are expected to increase 2.4% in 2012. • Manufacturing employment is expected to increase 1.3% in 2012. • Expect growth in U.S. exports in 2012. • Expect growth in U.S. imports in 2012.

  36. Summary Manufacturingcontinued • Manufacturing revenues (nominal) are up 7% in 2011. • Manufacturing revenues (nominal) are expected to increase 5.5% in 2012. • The U.S. dollar is expected to weaken slightly on average versus major trading partner currencies in 2012. • Overall attitude of manufacturing supply managers: optimistic, with 84% of respondents predicting 2012 will be the same as or better than 2011.

  37. Summary Non-Manufacturing • Operating rate is currently at 85.2%. • Production capacity increased 1.1% in 2011. • Production and provision capacity is expected to increase 3.2% in 2012. • Capital expenditures increased 4% in 2011. • Capital expenditures are expected to increase 0.1% in 2012. • Prices paid increased 2.8% in 2011.

  38. Summary Non-Manufacturing continued • Prices paid are expected to increase 2.7% in 2012. • Labor and benefit costs are expected to increase 1.8% in 2012. • Non-manufacturing employment is expected to increase 1.1% in 2012. • Expect export levels to increase in 2012. • Expect import growth in 2012.

  39. Summary Non-Manufacturing continued • Non-manufacturing revenues (nominal) are up 1.5% in 2011. • Non-manufacturing revenues (nominal) are expected to rise 3.1% in 2012. • Overall attitude of non-manufacturing supply managers: mostly positive outlook, with 82 percent of respondents predicting 2012 will be the same as or better than 2011.

  40. Questions

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