ISM® REPORTS ECONOMIC IMPROVEMENT TO CONTINUE IN 2024

Manufacturing Growth Expected in 2024; Revenue to Increase 5.6%; Capital Expenditures to Increase 11.9%; Capacity Utilization Currently at 83%; Services Growth Projected in 2024; Revenue to Increase 6.9%; Capital Expenditures to Increase 2.9%; Capacity Utilization Currently at 86.5%

TEMPE, Ariz., Dec. 15, 2023 /PRNewswire/ -- Economic improvement in the United States will continue in 2024, say the nation's purchasing and supply management executives in the December 2023 Semiannual Economic Forecast. Revenues are expected to increase in 15 of 18 manufacturing industries and 16 of 18 services-sector industries. Capital expenditures are expected to increase by 11.9 percent in the manufacturing sector (after a 14.9-percent increase in 2023) and increase by 2.9 percent in the services sector (after a 4.2-percent increase in 2023). In 2024, employment is expected to grow by 2 percent in manufacturing and 0.8 percent in services. After projected growth in manufacturing and a contraction in services in the first half (H1) of the year, growth in the second half (H2) is projected to accelerate in manufacturing and strongly re-emerge in the services sector.

These projections are part of the forecast issued by the Business Survey Committees of Institute for Supply Management^® (ISM^®). The forecast was released today by Timothy R. Fiore, CPSM, C.P.M, Chair of the ISM Manufacturing Business Survey Committee, and by Anthony S. Nieves, CPSM, C.P.M., A.P.P, CFPM, Chair of the ISM Services Business Survey Committee.

Manufacturing Summary
Expectations for 2024 are positive, as 58 percent of survey respondents expect revenues to be greater in 2024 than in 2023. The panel of purchasing and supply executives expects a 5.6-percent net increase in overall revenues for 2024, compared to a 0.9-percent increase reported for 2023. Fifteen of the 18 manufacturing industries expect revenue improvement in 2024, listed in order of largest to smallest projected increase: Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Paper Products; Furniture & Related Products; Primary Metals; Miscellaneous Manufacturing; Transportation Equipment; Chemical Products; Textile Mills; Machinery; Fabricated Metal Products; Plastics & Rubber Products; Nonmetallic Mineral Products; and Petroleum & Coal Products.

"Manufacturing's purchasing and supply executives expect to see overall growth in 2024. They are optimistic about overall business prospects for the first half of 2024 and more excited about faster growth in the second half. According to the ISM^® Report On Business^®, manufacturing grew for 28 consecutive months from June 2020 through September 2022, was unchanged in October, but dipped into contraction in November 2022, with the index remaining in contraction until now. Respondents expect raw materials pricing pressure to ease in 2024 and see H1 2024 profit margins improving over H2 2023. Wages and employment will continue to grow. Manufacturers also predict growth in both exports and imports in 2024," says Fiore.

In the manufacturing sector, respondents report the companies operating at 83 percent of normal capacity, up 1 percentage point from the 82 percent reported in May 2023. Purchasing and supply executives predict that capital expenditures will increase year over year by 11.9 percent in 2024, compared to the 14.9-percent increase reported for 2023 compared to 2022. Manufacturers expect employment in the sector to grow by 2 percent in 2024 relative to December 2023 levels, while labor and benefit costs are expected to increase an average of 5.2 percent. Respondents also expect the U.S. dollar to strengthen against the currencies of seven major trading partners in 2024.

The panel predicts that prices paid for raw materials will increase 3.2 percent during the first five months of the year, with an overall increase of 3.3 percent for 2024. This compares to a reported 4.1 percent increase in raw materials prices in 2023.

Services Summary
Forty-three percent of services supply management executives expect their 2024 revenues to be higher than in 2023. They expect a 6.9 percent net increase in overall revenues for 2024, compared to a 4.2-percent increase reported for 2023. The 16 industries expecting revenue increases in 2024 — listed in order of largest to smallest projected increase — are: Retail Trade; Professional, Scientific & Technical Services; Construction; Transportation & Warehousing; Management of Companies & Support Services; Wholesale Trade; Finance & Insurance; Public Administration; Mining; Accommodation & Food Services; Utilities; Health Care & Social Assistance; Arts, Entertainment & Recreation; Information; Other Services; and Educational Services.

"Services supply executives report operating at 86.5 percent of normal capacity, less than the 91 percent reported in May 2023. They are guarded about the first half of 2024, but expect robust growth in the second half, with a projected increase in capital reinvestment. They forecast that their capacity to produce products and provide services will rise by 4.1 percent during 2024, and capital expenditures will increase by 2.9 percent. Services panel members also predict their overall employment will increase by 0.8 percent during 2024," says Nieves.

Respondents in services industries expect the prices they pay for materials and services to increase by 3.4 percent during 2024. They also forecast that their overall labor and benefit costs will increase 3.3 percent. Profit margins decreased slightly in the second and third quarters of 2023 but respondents expect growth between now and May 2023.

OPERATING RATE

Manufacturing
Manufacturing purchasing and supply executives report their companies are currently operating at 83 percent of normal capacity. This is a 1-percentage point increase when compared to May 2023 (82 percent) and a decrease when compared to December 2022 (88.4 percent). The following nine industries — listed in order — are operating at or above the average rate of 83 percent: Paper Products; Petroleum & Coal Products; Transportation Equipment; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Computer & Electronic Products; Wood Products; Electrical Equipment, Appliances & Components; and Machinery.

Services
Services supply executives report their organizations are currently operating at 86.5 percent of normal capacity. This is a decrease compared to the 91 percent reported in May 2023 and below what was reported in December 2022 (89.9 percent). The 11 industries operating at or above the average capacity level of 86.5 percent — listed in order — are: Other Services; Finance & Insurance; Educational Services; Arts, Entertainment & Recreation; Utilities; Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Mining; Public Administration; Retail Trade; and Accommodation & Food Services.

PRODUCTION CAPACITY

Manufacturing
Production capacity in manufacturing increased 0.7 percent in 2023, as 35 percent of purchasing and supply executives reported an average capacity increase of 9.8 percent, 18 percent reported an average decrease of 17.4 percent, and 47 percent reported no change. This compares to a May 2023 predicted increase in production capacity of 0.4 percent for 2023. Expectations for 2024 are for an increase of 7.8 percent. The 14 industries that expect an increase in production capacity in 2024 — listed in order — are: Apparel, Leather & Allied Products; Transportation Equipment; Primary Metals; Plastics & Rubber Products; Machinery; Paper Products; Furniture & Related Products; Miscellaneous Manufacturing; Chemical Products; Computer & Electronic Products; Textile Mills; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; and Nonmetallic Mineral Products.

The principal means of achieving increases in production capacity in 2023 were (in order of importance):

1)   Additional personnel
2)   More hours worked with existing personnel
3)   Additional plant and/or equipment
4)   Replaced equipment with technically advanced equipment.

Services
The capacity to produce products or provide services in the services sector increased 3.9 percent during 2023. This is greater than what was predicted in May 2023 (2 percent) and 0.5 percentage point higher than the 3.4 percent predicted for the year in December 2022. For 2024, 47 percent of services supply managers expect increases averaging 9.3 percent, and 3 percent of respondents expect decreases averaging 9.6 percent. Fifty percent expect no change in capacity. The 17 industries expecting increases in capacity in 2024 — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Management of Companies & Support Services; Construction; Wholesale Trade; Health Care & Social Assistance; Retail Trade; Transportation & Warehousing; Finance & Insurance; Public Administration; Accommodation & Food Services; Mining; Real Estate, Rental & Leasing; Information; Arts, Entertainment & Recreation; Utilities; and Educational Services.

The principal means of achieving increases in production or provision capacity in 2023 were (in order of importance):

1)   Additional personnel (permanent, temporary or contract)
2)   Additional plant and/or equipment
3)   More hours worked with existing personnel
4)   Replaced equipment with technically advanced equipment.

CAPITAL EXPENDITURES — 2023 vs. 2022

Manufacturing
Purchasing and supply executives report 2023 capital expenditures increased 14.9 percent on average when compared to 2022 levels. Expenditures for 2023 beat survey respondents' previous expectations, as they predicted an increase of 0.4 percent for the year in May 2023. The 37 percent of purchasers who reported increased capital expenditures in 2023 indicated an average increase of 33.8 percent, while the 18 percent who said their capital spending was reduced reported an average decrease of 25.1 percent. Forty-five percent of respondents said their levels of spend were unchanged in 2023. The 14 industries showing increases in capital expenditures for 2023 — listed in order of percentage increase — are: Printing & Related Support Activities; Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Textile Mills; Transportation Equipment; Computer & Electronic Products; Food, Beverage & Tobacco Products; Paper Products; Furniture & Related Products; Petroleum & Coal Products; Primary Metals; Plastics & Rubber Products; Chemical Products; and Fabricated Metal Products.

Services
Services supply management executives report their level of capital expenditures in 2023 increased 4.2 percent compared to 2022. This is lower than the 6 percent increase reported for 2022 and slightly higher than the 4-percent increase predicted by respondents in May 2023. Thirty-seven percent report increases averaging 19.4 percent, while 14 percent report decreases averaging 21.6 percent. Forty-nine percent indicate they spent the same on capital expenditures in 2023 as in 2022. The 14 industries experiencing increases in capital expenditures in 2023 — listed in order of percentage increase — are: Agriculture, Forestry, Fishing & Hunting; Utilities; Public Administration; Wholesale Trade; Real Estate, Rental & Leasing; Management of Companies & Support Services; Construction; Educational Services; Mining; Professional, Scientific & Technical Services; Transportation & Warehousing; Arts, Entertainment & Recreation; Finance & Insurance; and Retail Trade.

PREDICTED CAPITAL EXPENDITURES — 2024 vs. 2023

Manufacturing
Purchasing and supply executives expect capital expenditures to increase 11.9 percent in 2024. The 35 percent of respondents who predict increased capital expenditures in 2024 indicate an average increase of 33.9 percent, while the 22 percent who said their capital spending would be reduced predict an average decrease of 24.6 percent. The remaining 43 percent said they expect to spend the same in 2024 as in 2023. The nine industries predicting increases in capital expenditures for 2024 — in the following order — are: Furniture & Related Products; Petroleum & Coal Products; Textile Mills; Machinery; Primary Metals; Fabricated Metal Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; and Miscellaneous Manufacturing.

Services
Services purchasing and supply executives are expecting an increase of 2.9 percent in capital expenditures in 2024, less than the 4.2 percent increase reported for 2023. The 40 percent of respondents expecting to spend more on capital expenditures predict an average increase of 15.5 percent. An additional 22 percent anticipate a decrease averaging 15.6 percent. Thirty-eight percent expect to spend the same on capital expenditures in 2024. The 14 industries expecting increases in capital expenditures in 2024 — listed in order of percentage increase — are: Utilities; Retail Trade; Accommodation & Food Services; Educational Services; Public Administration; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Mining; Arts, Entertainment & Recreation; Health Care & Social Assistance; Construction; Transportation & Warehousing; and Wholesale Trade.

PRICES — Changes Between End of 2022 and End of 2023

Manufacturing
After an earlier forecast in May 2023 of a 1-percent increase in prices paid for raw materials in 2023, survey respondents report price increases averaging 4.1 percent for the year. The 55 percent who say their prices are higher now than at the end of 2022 report an average increase of 10 percent, while the 25 percent who report lower prices indicate an average decrease of a 9 percent. The remaining 20 percent report no change in 2023. The nine industries experiencing price increases above the average of 4.1 percent in 2023 — listed in order — are: Printing & Related Support Activities; Plastics & Rubber Products; Petroleum & Coal Products; Primary Metals; Nonmetallic Mineral Products; Transportation Equipment; Miscellaneous Manufacturing; Computer & Electronic Products; and Machinery.

Services
In 2023, services supply executives report, prices paid increased by 5.7 percent. This is more than the 4.3-percent increase they predicted in May 2023, but less than the 8.4-percent increase for 2023 predicted one year ago. Sixty-six percent of respondents report price increases averaging 9.5 percent. Thirteen percent indicate decreased prices, with an average reduction of 5.3 percent, and 21 percent of respondents did not experience price changes this year. The six industries experiencing price increases above the average of 5.7 percent in 2023 — listed in order — are: Professional, Scientific & Technical Services; Utilities; Public Administration; Health Care & Social Assistance; Educational Services; and Management of Companies & Support Services.

PRICES – Predicted Changes Between End of 2023 and May 2024

Manufacturing
Forty-nine percent of purchasing and supply executives expect the prices they pay to increase in the first five months of 2024 by an average of 7.2 percent, while 22 percent anticipate decreases averaging 6 percent. Including the 29 percent who expect no change in prices, respondents expect a net average overall price increase of 3.2 percent before the end of May. The eight industries predicting a higher than 3.2 percent average increase in prices paid in the first five months of 2024 — listed in order — are: Textile Mills; Nonmetallic Mineral Products; Printing & Related Support Activities; Petroleum & Coal Products; Computer & Electronic Products; Primary Metals; Fabricated Metal Products; and Transportation Equipment.

Services
Services survey respondents predict purchases in the first five months of 2024 will cost an average of 3.7 percent more than at the end of 2023. This is less than the increase reported for calendar year 2023. Sixty-one percent of services respondents predict the prices they pay will increase an average of 7 percent before the end of May, 12 percent of respondents expect price decreases averaging 5 percent, and the remaining 27 percent predict no change in prices. The eight industries predicting price increases of at least 3.7 percent on average in the first five months of 2024 — listed in order of percentage increase — are: Health Care & Social Assistance; Agriculture, Forestry, Fishing & Hunting; Public Administration; Utilities; Professional, Scientific & Technical Services; Accommodation & Food Services; Arts, Entertainment & Recreation; and Management of Companies & Support Services.

PRICES — Predicted Changes Between End of 2023 and End of 2024

Manufacturing
Respondents predict a net average increase in prices paid of 3.3 percent between December 2023 and December 2024. Fifty-two percent of respondents expect an average price increase of 7.1 percent in 2024, while 24 percent expect an average reduction of 5.2 percent. The remaining 24 percent expect no change in their average prices paid for the year. The five industries expecting price increases above the predicted average of 3.3 percent by the end of 2024 are: Textile Mills; Printing & Related Support Activities; Computer & Electronic Products; Nonmetallic Mineral Products; and Primary Metals.

Services
For all of 2024, services supply management executives expect their prices to increase an average of 3.4 percent. Fifty-nine percent of respondents expect increases averaging 6.9 percent, 14 percent anticipate prices to drop an average of 4.8 percent, and 27 percent foresee no change in prices next year. The nine industries expecting greater than the 3.4-percent average price increase by the end of 2024 — listed in order of percentage increase — are: Health Care & Social Assistance; Utilities; Management of Companies & Support Services; Accommodation & Food Services; Professional, Scientific & Technical Services; Public Administration; Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; and Wholesale Trade.

LABOR AND BENEFIT COSTS — Predicted Rate Change End of 2023 vs. End of 2024

Manufacturing
Purchasing and supply executives expect higher overall labor and benefit costs for 2024. Seventy percent of respondents expect labor and benefit costs to grow by an average of 5.9 percent for all of 2024, while the 2 percent forecasting lower costs see them decreasing by an average of 13.2 percent. Including the 28 percent of respondents who believe costs will remain the same, the overall net rate of increase is expected to be 5.2 percent for the year. The three industries expecting to pay an increase of 5.2 percent or greater are: Plastics & Rubber Products; Transportation Equipment; and Primary Metals.

Services
Services purchasing and supply executives expect a 3.3-percent increase in labor and benefit costs in 2024. Sixty-five percent of respondents expect such costs to increase by an average of 5.5 percent. Another 3 percent of respondents expect labor and benefit costs to shrink by an average of 8.3 percent, and 32 percent believe costs will remain stable during 2024. The eight industries expecting to pay an increase of 3.3 percent or higher — listed in order of percentage increase — are: Professional, Scientific & Technical Services; Educational Services; Retail Trade; Wholesale Trade; Utilities; Other Services; Health Care & Social Assistance; and Agriculture, Forestry, Fishing & Hunting.

EMPLOYMENT — Change in Overall Employment

Manufacturing
ISM's Manufacturing Business Survey Committee members report that sector employment decreased 0.6 percent in 2023 and forecast that employment will increase by 2 percent, on average, for the full year of 2024. Thirty-three percent of respondents expect employment to be, on average, 6.7 percent higher in 2024, while 17 percent predict employment to be lower by an average of 7 percent. The remaining 50 percent of respondents expect their employment levels to be unchanged in 2024. The 12 industries predicting increases in employment in 2024 — listed in order — are: Nonmetallic Mineral Products; Paper Products; Textile Mills; Computer & Electronic Products; Food, Beverage & Tobacco Products; Machinery; Transportation Equipment; Petroleum & Coal Products; Chemical Products; Electrical Equipment, Appliances & Components; Primary Metals; and Miscellaneous Manufacturing.

Services
ISM's Services Business Survey Committee members report that sector employment has increased 0.3 percent since May 2023 and increased 1.9 percent for all of 2023. They forecast that employment will increase 0.8 percent by the end of 2024. In the coming year, 29 percent of respondents expect higher levels of employment (up 7.3 percent on average), 16 percent anticipate lower levels (down 7.8 percent on average), and 55 percent expect their employment levels to be unchanged. The nine industries anticipating increases in employment in 2024 — listed in order — are: Professional, Scientific & Technical Services; Accommodation & Food Services; Retail Trade; Agriculture, Forestry, Fishing & Hunting; Utilities; Other Services; Arts, Entertainment & Recreation; Health Care & Social Assistance; and Wholesale Trade.

EXPORT BUSINESS — Predicted Change for Next Half Year (First Half of 2024)

Manufacturing
Survey responses indicate executives expect increases in new export orders for the first half of 2024. Of the 61 percent of respondents who reported export activity, 42 percent predict an increase (40 percent moderate and 2 percent substantial) over the next six months. Nine percent of respondents predict a decrease (9 percent moderate and 0 percent substantial) in their exports, and 49 percent anticipate no change in exports over the next six months. The 14 industries expecting growth in exports during the first half of 2024 — listed in order — are: Nonmetallic Mineral Products; Petroleum & Coal Products; Paper Products; Furniture & Related Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Fabricated Metal Products; Transportation Equipment; Machinery; Chemical Products; Primary Metals; Computer & Electronic Products; and Electrical Equipment, Appliances & Components.

Services
For the first half of 2024, respondents whose organizations provide services outside the U.S. are optimistic concerning business. Of the 18 percent of Services Business Survey Committee respondents who report that they export, 22 percent predict an increase (22 percent moderate and 0 percent substantial) over the next six months. Two percent of respondents expect a decrease in their exports (2 percent moderate and 0 percent substantial), and 60 percent anticipate no change in exports over the next six months. Of the industries that export, the seven that expect growth in the first half of 2024 — listed in order — are: Retail Trade; Finance & Insurance; Transportation & Warehousing; Health Care & Social Assistance; Wholesale Trade; Information; and Professional, Scientific & Technical Services.

IMPORT BUSINESS — Predicted Change for Next Half Year (First Half of 2024)

Manufacturing
Respondents expect increases in imports in the first half of 2024. Of the 70 percent of purchasers who reported they import materials, 35 percent predict an increase over the next six months (33 percent moderate and 2 percent substantial), while 17 percent predict a decrease (16 percent moderate and 1 percent substantial). The remaining 48 percent of survey respondents expect no change in imports in the first half of 2024. The 15 industries expecting growth in imports — listed in order — are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Textile Mills; Wood Products; Paper Products; Plastics & Rubber Products; Fabricated Metal Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Machinery; Chemical Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Transportation Equipment.

Services
Services executives' expectations for the use of imports for the first half of 2024 have increased compared to their expectations in December 2022 for the first half of 2023. Of the 29 percent of services organizations who reported they import materials and services, 36 percent (33 percent moderate and 3 percent substantial) predict an increase during the first half of 2024. Twelve percent of respondents (12 percent moderate and 0 percent substantial) predict a decrease. The remaining 52 percent expect no change in imports over the next six months. The 10 industries expecting growth in imports — listed in order — are: Accommodation & Food Services; Retail Trade; Construction; Finance & Insurance; Real Estate, Rental & Leasing; Utilities; Management of Companies & Support Services; Transportation & Warehousing; Professional, Scientific & Technical Services; and Wholesale Trade.

INVENTORY-TO-SALES RATIO

Manufacturing
Of the manufacturing panel, 15 percent anticipate increasing their purchased inventory-to-sales ratio during 2024. An additional 24 percent expect their ratio to drop, and 61 percent forecast no change. The diffusion index of 45.4 percent suggests the inventory-to-sales ratio will decrease in 2024.

Services
Eighteen percent anticipate increasing their purchased inventory-to-sales ratio during 2024. An additional 8 percent expect their ratio to drop, and 74 percent forecast no change. The diffusion index of 55 percent suggests the inventory-to-sales ratio will increase in 2024.

Note: A diffusion index above 50 percent would indicate an increase in the inventory-to-sales ratio; below 50 percent, a decrease in the ratio.

U.S. DOLLAR — Predicted Strength vs. Major Trading Currencies — in 2024 — Manufacturing Only

Manufacturing
Purchasing and supply executives are expecting the U.S. dollar will generally strengthen in 2024 against all the foreign currencies listed below. The average diffusion index for this forecast is 54.3 percent, a decrease of 9.5 percentage points compared to the December 2022 forecast average of 63.8 percent for 2023.

Note: A diffusion index above 50 percent would predict a generally stronger U.S. dollar; below 50 percent, a generally weaker U.S. dollar, with the distance from 50 percent indicative of the predicted strength or weakness.

BUSINESS REVENUES

Business Revenues Comparison — 2023 vs. 2022

Manufacturing
Overall, revenues increased for manufacturers. Forty-one percent of respondents say revenue was better than in 2022, increasing on average 9.9 percent. Twenty-eight percent say their revenues decreased in 2023 by an average of 12.5 percent, and the remaining 31 percent indicate no change. Overall, purchasing and supply executives indicate a net increase of 0.9 percent in business revenues for 2023 over 2022. This is less than the 1.7-percent increase that was forecast in May 2023 for all of 2023 and much less than the 5.5-percent increase predicted in December 2022 for all of 2023. The eight industries reporting increases in revenues in 2023 — listed in order — are: Transportation Equipment; Food, Beverage & Tobacco Products; Furniture & Related Products; Petroleum & Coal Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Machinery; and Nonmetallic Mineral Products.

Services
Services supply management executives report that business revenues for 2023 increased compared to 2022 by 4.2 percent. This is more than the 2.7-percent increase predicted for the year in May 2023. The 46 percent of respondents reporting better business in 2023 than in 2022 estimate an average revenue increase of 19.4 percent. This contrasts with an average decrease of 21.6 percent reported by the 23 percent of respondents who indicate worse business in 2023. The remaining 31 percent have experienced no change in 2023. The 16 industries reporting increases in revenues in 2023 — in the following order — are: Professional, Scientific & Technical Services; Management of Companies & Support Services; Retail Trade; Accommodation & Food Services; Transportation & Warehousing; Public Administration; Information; Other Services; Arts, Entertainment & Recreation; Mining; Wholesale Trade; Finance & Insurance; Utilities; Agriculture, Forestry, Fishing & Hunting; Educational Services; and Health Care & Social Assistance.

Business Revenues Prediction for 2024

Manufacturing
Manufacturing survey respondents forecast that business revenues for 2024 will be stronger than in 2023. The 58 percent of respondents forecasting better organizational business revenues in 2024 estimate an average increase of 9.2 percent. This contrasts with an average decrease of 10.3 percent forecast by the 13 percent who predict lower business revenues in 2024. Including the 29 percent who see no change in 2024, the forecast for overall net increase in business revenues for 2024 is 5.6 percent. Fifteen of the 18 manufacturing industries expect revenue improvement in 2024, listed in order of largest to smallest projected increase: Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Paper Products; Furniture & Related Products; Primary Metals; Miscellaneous Manufacturing; Transportation Equipment; Chemical Products; Textile Mills; Machinery; Fabricated Metal Products; Plastics & Rubber Products; Nonmetallic Mineral Products; and Petroleum & Coal Products.

Services
Services survey respondents forecast that business revenues for 2024 will improve by an average of 6.9 percent. This is more than the 4.2-percent increase reported for 2023, and more than the 3.1-percent increase predicted one year ago for 2023 revenues. The 43 percent of respondents forecasting better business in 2024 estimate an average revenue increase of 17.2 percent. This contrasts with an average decrease of 9.2 percent forecast by the 5 percent who predict worse business in 2024. The remaining 52 percent see no change. The 16 industries expecting revenue increases in 2024 — listed in order of largest to smallest projected increase — are: Retail Trade; Professional, Scientific & Technical Services; Construction; Transportation & Warehousing; Management of Companies & Support Services; Wholesale Trade; Finance & Insurance; Public Administration; Mining; Accommodation & Food Services; Utilities; Health Care & Social Assistance; Arts, Entertainment & Recreation; Information; Other Services; and Educational Services.

PROFIT MARGINS

Manufacturing
Survey respondents report that profit margins increased on average during the second and third quarters of 2023. Thirty-six percent of respondents' companies experienced an increase, 26 percent had lower margins, and 38 percent reported no change. Expectations are higher between now and May 2023, as 32 percent of respondents forecast better profit margins, 17 percent predict lower profit margins, and 51 percent predict no change. The 12 industries expecting an increase in profit margins through May 2024 — listed in order of percentage increase — are: Apparel, Leather & Allied Products; Textile Mills; Computer & Electronic Products; Furniture & Related Products; Paper Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Transportation Equipment; Electrical Equipment, Appliances & Components; Primary Metals; Chemical Products; and Machinery.

Services
Among services supply management executives, 21 percent indicated their organizations experienced an increase in profit margins during the second and third quarters of 2023, 21 percent found smaller profit margins, and 58 percent had no change in margins during that timeframe. From now through May 2024, 28 percent of supply managers expect improved profit margins, 17 percent expect lower profit margins, and the remaining 55 percent of respondents anticipate no change. The 10 industries expecting an increase in profit margins through May 2024 are, in the following order: Mining; Retail Trade; Management of Companies & Support Services; Arts, Entertainment & Recreation; Transportation & Warehousing; Professional, Scientific & Technical Services; Finance & Insurance; Information; Wholesale Trade; and Health Care & Social Assistance.

BUSINESS COMPARISON

The First Half of 2024 Compared with the Last Half of 2023

Manufacturing
Manufacturing survey respondents are optimistic about the next six months, as reflected in the diffusion index reading of 54.9 percent. Comparing their outlook for the first half of 2024 to the last half of 2023, 31 percent predict it will be better, 20 percent predict it will be worse, and 49 percent expect no change. The 11 industries expecting improvement in the first half of 2024 — listed in order — are: Apparel, Leather & Allied Products; Paper Products; Primary Metals; Miscellaneous Manufacturing; Petroleum & Coal Products; Chemical Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Plastics & Rubber Products; Computer & Electronic Products; and Transportation Equipment.

Services
The initial half of 2024 is predicted to be slightly worse than the latter half of 2023, according to services purchasing and supply executives. The diffusion index indicating current expectations registered 49 percent. Twenty-eight percent of respondents expect the first half of next year to be better than the last half of 2023. Thirty percent (an increase of 13 percentage points) anticipate it will be worse, and 42 percent predict no change. The 10 industries expecting improvement in the first half of 2024 — listed in order — are: Transportation & Warehousing; Accommodation & Food Services; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Wholesale Trade; Health Care & Social Assistance; Arts, Entertainment & Recreation; Management of Companies & Support Services; Utilities; and Retail Trade.

Note: A diffusion index above 50 percent would generally indicate an expectation of the first half of the coming year being better than the second half of the current year.

The Second Half of 2024 Compared with the First Half of 2024

Manufacturing
Purchasing and supply executives in manufacturing are even more optimistic about the second half of 2024 compared to the first half. The share of survey respondents who forecast the second half of 2024 to be better than the first half is 40 percent, while 13 percent expect it to be worse, and 47 percent expect no change. The diffusion index figure for the second half of 2024 is 63.9 percent, compared to 49 percent for the first half of 2024. The 14 industries predicting improvement in the second half of 2024 — listed in order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Textile Mills; Wood Products; Primary Metals; Plastics & Rubber Products; Chemical Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Fabricated Metal Products; Paper Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Transportation Equipment.

Services
Services purchasing and supply executives feel more optimistic about the second half of 2024 as compared to the first half of the year. (The diffusion index reading for the second half is 65.5 percent; it is 49 percent for the first half.) The share of respondents who currently forecast the second half of 2024 to be better than the first half is 45 percent, while 14 percent expect it to be worse. An additional 41 percent of purchasers expect no change. The 12 industries expecting improvement in the second half of 2024 — listed in order — are: Real Estate, Rental & Leasing; Transportation & Warehousing; Retail Trade; Management of Companies & Support Services; Information; Professional, Scientific & Technical Services; Wholesale Trade; Health Care & Social Assistance; Mining; Agriculture, Forestry, Fishing & Hunting; Utilities; and Educational Services.

Note: A diffusion index above 50 percent would generally indicate an expectation of the second half of the coming year being better than the first half.

OUTLOOK FOR THE NEXT 12 MONTHS

Manufacturing
Compared to the outlook for 2023 reported in December 2022, survey respondents this year are more optimistic about the outlook for 2024. Thirty-four percent of respondents believe 2024 will be better than 2023. Forty-six percent of respondents believe 2024 will be the same as 2023, and 20 percent believe 2024 will be worse than 2023. The resulting diffusion index for the 2024 outlook is 56.5 percent, compared with 50 percent for 2023 from one year ago.

Services
Services survey respondents are overall slightly less optimistic compared to their predictions for 2023. A marginally larger proportion of respondents this year believe 2024 will be better than 2023. This is offset by an increase in the proportion of respondents indicating that 2024 will be worse. The diffusion index for the 2024 outlook of 55.3 percent is lower than the diffusion index going into 2023 (55.6 percent).

SPECIAL QUESTION TOPIC #1: HIRING WORKERS TO FILL OPEN POSITIONS

We asked the panel, "In the past six months, has your firm had difficulty hiring workers to fill open positions?"

Respondents indicated:

SPECIAL QUESTION TOPIC #2: HIRING DIFFICULTIES

We asked the panel, "If 'yes,' what have you done to deal with these difficulties?"

Respondents indicated:

SPECIAL QUESTION TOPIC #3: NO HIRING DIFFICULTIES

We asked the panel, "If you have not had difficulty hiring, why not?"

Respondents indicated:

SPECIAL QUESTION TOPIC #4: ABILITY TO PASS PRICING INCREASES

We asked the panel, "Are you able to pass price increases to customers?"

Respondents indicated:

SPECIAL QUESTION TOPIC #5: CAUSE OF SUPPLY CHAIN DISRUPTIONS

We asked the panel, "Are most of the supply chain disruptions in the manufacturing/services sectors due to foreign developments (for example, microchips or other foreign-sourced supplies) or to domestic developments (such as port delays, lack of truck drivers or domestically-produced supplies like steel or aluminum)?"

Respondents indicated:

SPECIAL QUESTION TOPIC #6: LEVEL OF BACK ORDERS SUPPORTING PRODUCTION

We asked the panel, "How do you see your current level of back orders as supporting your production presently and over the new few months?"

Respondents indicated:

SPECIAL QUESTION TOPIC #7: RESHORING FROM CHINA

We asked the panel, "In the past six months, has your organization been impacted by reshoring production from China?"

Respondents indicated:

SPECIAL QUESTION TOPIC #8: INCREASING INVENTORIES

Manufacturing
We asked the panel, "Do you plan on increasing your inventory of semi-finished and finished goods over the first half of 2024?"

• Our inventory is in line with expected demand (53%)
• Our inventory is insufficient to meet expected demand (15%)
• Our inventory currently exceeds expected demand (30%)
• Other (2%)

Services
We asked the panel, "Do you plan on increasing your inventory of semi-finished and finished goods over the first half of 2024?"

• Our inventory is in line with expected demand (43%)
• Our inventory is insufficient to meet expected demand (20%)
• Our inventory currently exceeds expected demand (12%)
• Other (25%)

SPECIAL QUESTION TOPIC #9: RETURN TO PRE-PANDEMIC NORMS

Manufacturing
We asked the panel, "When do you anticipate supply chain conditions to be essentially back to pre-pandemic norms?"

• They are already back to normal (31%)
• By next spring (13%)
• By the end of next summer (10%)
• By the end of 2024 (22%)
• Never (24%)

Services
We asked the panel, "When do you anticipate supply chain conditions to be essentially back to pre-pandemic norms?"

• They are already back to normal (22%)
• By next spring (14%)
• By the end of next summer (6%)
• By the end of 2024 (30%)
• Never (28%)

SUMMARY

Manufacturing
The manufacturing sector contracted in November for a 13th consecutive month, and the forecast indicates this trend may reverse in the first half of 2024 with continued strengthening in the second half.

• Operating rate is currently at 83 percent.
• Production capacity increased by 0.7 percent in 2023.
• Production capacity is expected to increase by 7.8 percent in 2024.
• Capital expenditures increased 14.9 percent in 2023.
• Capital expenditures are expected to increase 11.9 percent in 2024.
• Prices paid increased 4.1 percent in 2023.
• Overall, 2024 prices paid are expected to increase 3.3 percent.
• Labor and benefit costs are expected to increase 5.2 percent in 2024.
• Manufacturing employment is predicted to increase 2 percent in 2024.
• U.S. exports growth expected in 2024.
• U.S. imports growth expected in 2024.
• The U.S. dollar is expected to strengthen versus the currencies of seven major trading partners in 2024.
• Manufacturing revenues increased 0.9 percent in 2023.
• Manufacturing revenues are expected to increase 5.6 percent in 2024.
• Manufacturing supply managers have a positive outlook, with 34 percent of respondents predicting 2024 will be better than 2023, and 20 percent of respondents predicting 2024 will be worse than 2023.

Services
The services sector grew for the 11th month in a row in November, and the forecast indicates continued expansion in 2024.

• Operating rate is currently at 86.5 percent.
• Production capacity increased 3.9 percent in 2023.
• Production and provision capacity is expected to increase 4.1 percent in 2024.
• Capital expenditures increased 4.2 percent in 2023.
• Capital expenditures are expected to increase 2.9 percent in 2024.
• Prices paid increased 5.7 percent in 2023.
• Prices paid are expected to increase 3.4 percent in 2024.
• Labor and benefit costs are expected to increase 3.3 percent in 2024.
• Employment is expected to increase 0.8 percent in 2024.
• Export levels expected to increase in 2024.
• Import growth expected in 2024.
• Services revenues are up 4.2 percent in 2023.
• Services revenues are expected to rise 6.9 percent in 2024.
• Services supply managers are positive in their outlook, with 33 percent of respondents predicting 2024 will improve compared to 2023.

*Miscellaneous Manufacturing includes items such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies.

**Other Services include services such as equipment and machinery repairing; promoting or administering religious activities; grant making; advocacy; and providing dry-cleaning and laundry services, personal care services, death care services, pet care services, photofinishing services, temporary parking services, and dating services.

About This Report
The data presented herein is obtained from a survey of manufacturing and services supply executives nationwide during November 2023 based on information they have collected within their respective organizations. ISM^® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making.

Data and Method of Presentation
In addition to this forecast, the Manufacturing ISM^® Report On Business^® is issued monthly and is considered by many economists to be the most reliable near-term economic barometer available. It is reviewed regularly by government agencies and economic business leaders. The report, compiled from responses to questions asked of purchasing and supply executives across the country, tracks industrial production, new orders, inventories, supplier deliveries, imports, exports, backlog of orders, employment, customers' inventories, buying policies and prices. The report has been issued by the association since 1931, except during World War II. The composition of the Manufacturing Business Survey Committee is stratified according to the North American Industry Classification System (NAICS) and each of the following NAICS-based industry's contribution to gross domestic product (GDP): Food, Beverage & Tobacco Products; Textile Mills; Apparel, Leather & Allied Products; Wood Products; Paper Products; Printing & Related Support Activities; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Furniture & Related Products; and Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies). The data are weighted based on each industry's contribution to GDP. According to the BEA estimates for 2021 GDP (released December 22, 2022), the six largest manufacturing subsectors are: Computer & Electronic Products; Chemical Products; Transportation Equipment; Food, Beverage & Tobacco Products; Machinery; and Petroleum & Coal Products. Beginning in February 2018 with January 2018 data, computation of the indexes is accomplished utilizing unrounded numbers.

Covering the services sector, ISM debuted the Services ISM^® Report On Business^® in June 1998. The Services ISM Report On Business^® is released on the third business day of each month and is based on data received from purchasing and supply executives across the country. The report covers business activity, new orders, backlog of orders, new export orders, inventory change, inventory sentiment, imports, prices, employment, and supplier deliveries. The Services Business Survey Committee responses are divided into the following NAICS code categories: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Construction; Wholesale Trade; Retail Trade; Transportation & Warehousing; Information; Finance & Insurance; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Management of Companies & Support Services; Educational Services; Health Care & Social Assistance; Arts, Entertainment & Recreation; Accommodation & Food Services; Public Administration; and Other Services (services such as Equipment & Machinery Repairing; Promoting or Administering Religious Activities; Grantmaking; Advocacy; and Providing Dry-Cleaning & Laundry Services, Personal Care Services, Death Care Services, Pet Care Services, Photofinishing Services, Temporary Parking Services, and Dating Services). The data are weighted based on each industry's contribution to GDP. According to the BEA estimates for 2021 GDP (released December 22, 2022), the six largest services sectors are: Real Estate, Rental & Leasing; Government; Professional, Scientific, & Technical Services; Health Care & Social Assistance; Information; and Finance & Insurance.  Beginning in February 2020 with January 2020 data, computation of the indexes is accomplished utilizing unrounded numbers. For this report, outliers have been adjusted.

The industries reporting growth, as indicated in the Manufacturing and Services ISM^® Report On Business^® monthly reports, and in this semiannual forecast, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

ISM ROB Content
The Institute for Supply Management^® ("ISM") Report On Business^® (both Manufacturing and Services) ("ISM ROB") contains information, text, files, images, images, video, sounds, musical works, works of authorship, applications, and any other materials or content (collectively, "Content") of ISM ("ISM ROB Content"). ISM ROB Content is protected by copyright, trademark, trade secret, and other laws, and as between you and ISM, ISM owns and retains all rights in the ISM ROB Content. ISM hereby grants you a limited, revocable, nonsublicensable license to access and display on your individual device the ISM ROB Content (excluding any software code) solely for your personal, non-commercial use. The ISM ROB Content may also contain Content of users and other ISM licensors. Except as provided herein or as explicitly allowed in writing by ISM, you may not copy, download, stream, capture, reproduce, duplicate, archive, upload, modify, translate, publish, broadcast, transmit, retransmit, distribute, perform, display, sell, or otherwise use any ISM ROB Content.

Except as explicitly and expressly permitted by ISM, you are strictly prohibited from creating works or materials (including but not limited to tables, charts, data streams, timeseries variables, fonts, icons, link buttons, wallpaper, desktop themes, on-line postcards, montages, mash-ups and similar videos, greeting cards, and unlicensed merchandise) that derive from or are based on the ISM ROB Content. This prohibition applies regardless of whether the derivative works or materials are sold, bartered, or given away. You may not either directly or through the use of any device, software, internet site, web-based service, or other means remove, alter, bypass, avoid, interfere with, or circumvent any copyright, trademark, or other proprietary notices marked on the Content or any digital rights management mechanism, device, or other content protection or access control measure associated with the Content including geo-filtering mechanisms. Without prior written authorization from ISM, you may not build a business utilizing the Content, whether or not for profit.

You may not create, recreate, distribute, incorporate in other work, or advertise an index of any portion of the Content unless you receive prior written authorization from ISM. Requests for permission to reproduce or distribute ISM ROB Content can be made by contacting in writing at: ISM Research, Institute for Supply Management, 309 W. Elliot Road, Suite 113, Tempe, AZ 85284, or by emailing [email protected], Subject: Content Request.

ISM shall not have any liability, duty, or obligation for or relating to the ISM ROB Content or other information contained herein, any errors, inaccuracies, omissions or delays in providing any ISM ROB Content, or for any actions taken in reliance thereon. In no event shall ISM be liable for any special, incidental, or consequential damages, arising out of the use of the ISM ROB. Report On Business^®, PMI^®, and NMI^® are registered trademarks of Institute for Supply Management^®. Institute for Supply Management^® and ISM^® are registered trademarks of Institute for Supply Management, Inc.

About Institute for Supply Management^®
Institute for Supply Management^® (ISM^®) is the first and leading not-for-profit professional supply management organization worldwide. Its community of more than 50,000 in more than 100 countries manage about US$1 trillion in corporate and government supply chain procurement annually. Founded in 1915 by practitioners, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM empowers and leads the profession through the ISM^® Report On Business^®, its highly-regarded certification and training programs, corporate services, events and assessments. The ISM^® Report On Business^®, Manufacturing, Services, and Hospital, are three of the most reliable economic indicators available, providing guidance to supply management professionals, economists, analysts, and government and business leaders. For more information, please visit: www.ismworld.org.

The full text version of each report is posted on ISM's Home Page at www.ismworld.org on the first and third business days* of every month after 10:00 a.m. (ET). The one exception is in January, the reports are released on the second and fourth business day of the month.

The next Manufacturing ISM^® Report On Business^® featuring December 2023 data will be released at 10:00 a.m. ET on Wednesday, January 3, 2024.

The next Services ISM^® Report On Business^® featuring December 2023 data will be released at 10:00 a.m. ET on Friday, January 5, 2024.

*Unless the NYSE is closed.

SOURCE Institute for Supply Management

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