ISM’s ‘Supply Chain Planning Forecast’ points to mixed growth patterns, for manufacturing and services

The paths to growth, for the manufacturing and services sectors, remain mixed, according to the Institute for Supply Management’s (ISM) December 2024 ISM Supply Chain Planning Forecast.

Data for this report is based on feedback from U.S.-based purchasing and supply chain executives in manufacturing and non-manufacturing sectors.

For manufacturing, ISM said revenues increased 0.8% in 2024, below the 2.1% increase cited in the May report, with revenues expected to be up 4.2% in 2025, with 60% of ISM respondents expecting revenue gains. ISM noted that 10 of the 18 manufacturing it tracks saw revenue improvement in 2024, including: Computer & Electronic Products; Miscellaneous Manufacturing; Furniture & Related Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Transportation Equipment; Nonmetallic Mineral Products; Paper Products; and Wood Products.

Manufacturing capital expenditures (capex) rose 5.2% annually in 2024, topping the May report’s 1% estimate, with capex expected to rise 5.2% in 2025. It added that 33% of the report’s respondents that saw  capex gains in 2024 pointed to an average increase of 30%, and the 20% saying their capex was down saw an average decrease of 21.2%.

Other key manufacturing findings included:

• prices paid increased 3% in 2024, with a 3% increase expected in 2025;
• manufacturing employment is expected to increase 0.8% in 2024;
• production capacity increased 1.7% in 2024 and is expected to rise 4% in 2025; and
• the manufacturing operating rate, at 82.3 of normal capacity is 0.5% higher than May’s estimate

“Manufacturing’s purchasing and supply executives expect to see overall growth in 2025,” wrote Tim Fiore, Chair of the ISM Manufacturing Business Survey Committee. “They are optimistic about overall business prospects for the first half of 2025 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 and dipped into contraction in November 2022. The index has remained in contraction since, except for a reading of 50.3 percent in March 2024. Respondents expect raw materials pricing pressure to ease in 2025 and see first-half 2025 profit margins improving over the second half of 2024. Wages and employment will continue to grow. Manufacturers also predict growth in both exports and imports in 2025.”

Services outlook: ISM member panelists reported that 2024 business revenues posted a 3.7% annual gain, ahead of the expected 2.9% from the May report. And it noted that the 51% of respondents reporting improved 2024 revenues, estimated an average revenue increase of 9.6% compared to the average 204 revenue decrease of 10.5%, as seen by the 11% whom called for worse 2024 business conditions.

And it added that all 18 Services sectors reported 2024 gains.

Services capex are expected to come in up 5.1% in 2025 compared to 2024, with 33% of panelists predicting for capex, on average, to increase 21%.

And 2024 services capacity utilization came in at 87.4%, below the 88.6 reported in May, with the report noting that respondents are optimistic about the first half of 2025, with growth expected to continue in the second half of the year.

Other key services findings include:

• production capacity increased 3.2% in 2024, ahead of May’s 2.6% estimate;
• prices paid increased 5.2% in 2024 and are expected to rise 5.3% in 2025
• employment is expected to increase 0.8% in 2025; and
• labor and benefit costs are expected to be up 3.5% in 2025

“Services supply executives report operating at 87.4 percent of normal capacity, less than the 88.6 percent reported in May 2024,” said Steve Miller, Chair of the ISM Services Business Survey Committee. “They are optimistic about the first half of 2025 and expect growth to continue in the second half, with a projected increase in capital investment. They forecast that their capacity to produce products and provide services will rise by 2.8 percent during 2025, and capital expenditures will increase by 5.1 percent. Services Business Survey Panel members also predict their overall employment will increase by 0.8 percent during 2025.”