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The Economy

ISM Spring Semiannual Forecast: 2020 Manufacturing Revenue Expected to Fall 10.3%

May 15, 2020

Economic downturn likely to last through the rest of 2020, says Institute for Supply Management forecast.

According to executives surveyed by the Institute for Supply Management, manufacturing will shrink in 2020 as average revenue falls 10.3% and capital expenditures fall 19.1% over the rest of the year. The ISM’s December 2019 report, published before the coronavirus was declared a pandemic by the World Health Organization, had originally predicted 4.8% average revenue growth and a 2.1% drop in capital expenditure.

Only 18% of manufacturing respondents said that their own company’s revenue would increase over the year, and predicted on average a rise of 10.6%. About a quarter of all manufacturers, 24%, expected no change in their own company’s revenue, and 58% of respondents predicted their own company’s revenue would fall an average of 21%.

“With 15 of the 18 manufacturing sector industries—including five of the six big industry sectors—predicting revenue declines for 2020, panelists forecast that recovery will likely not occur until near the end of the year,” said ISM Chair Timothy Fiore.

Clothing and leather manufacturers as well as food and beverage producers reported that they expected revenue to increase. Manufacturers in all other sectors—including transportation equipment, primary metals, machinery, textile mills, electrical equipment, fabricated metal products, chemical products, and paper products—expect it to contract.

The survey also indicated that the operating rate in manufacturing is currently about 75.9% of normal capacity, or 7.8% less than the reported rate in December 2019. Prices of raw materials are expected to fall a total of 1.6% by the end of the year compared to the end of 2019: given the movement of prices earlier in the year, that predicts prices will increase by 1.2% over the rest of 2020.

Manufacturing employment is expected to decrease by 5.3% by the end of the year as the sector as a whole contracts. Manufacturers in every surveyed sector except for paper products anticipated that employment in their sector would fall over the course of the year.