US Economic Expansion To Continue in 2016

US economic growth will continue in 2016, according to purchasing and supply management executives in their December 2015 Semiannual Economic Forecast. The manufacturing sector is optimistic about growth in 2016, with revenues expected to increase in 16 manufacturing industries, and the non-manufacturing sector predicts that 15 of its industries will post higher revenues. Capital expenditures, a major driver in the US economy, are expected to increase by 1% in the manufacturing sector and by 7.5% in the non-manufacturing sector. Manufacturing expects that its employment base will grow by 0.2%, while non-manufacturing expects employment growth of 1.7%, The projections are part of the forecast issued by the business survey committee of the Institute for Supply Management.


Expectations for 2016 are positive as 63% of survey respondents expect revenues to be greater in 2016 than in 2015. The panel of purchasing and supply executives expects a 4.1% net increase in overall revenues for 2016, compared to a 1.4% increase reported for 2015 over 2014 revenues. The 16 manufacturing industries expecting revenue improvement in 2016 over 2015 are: furniture and related products, nonmetallic mineral products, computer and electrical products, miscellaneous manufacturing, printing and related support activities, textile mills, fabricated metal products, primary metals, chemical products, paper products, transportation equipment, food, beverage and tobacco products, wood products, plastics and rubber products, machinery and electrical equipment, appliances and components.


In the manufacturing sector, respondents report operating at 81.6% of their normal capacity, up 2.1 percentage points from the 79.5% reported in April 2015. Purchasing and supply executives predict that capital expenditures will increase by a modest 1% in 2016 over 2015, compared to the 8.3% increase reported for 2015 over 2014. Manufacturers have an expectation that employment in the sector will increase by only 0.2% in 2016, while labor and benefit costs are expected to increase an average of 1.7%. Respondents also expect the US dollar to strengthen against all seven currencies of major trading partners in 2016, as was the case in 2015.


The panel predicts the prices paid for raw materials will increase by 0.1% during the first four months of 2016, and will increase an additional 0.4% during the balance of the year, with an overall increase of 0.5% for 2016. This compares to a reported 2.6% decrease in raw materials prices for 2015 compared with 2014.