Factories in US grew less optimistic about sales, ISM says

May 8 (Bloomberg) -- Manufacturers in the U.S. became less optimistic about 2012 sales growth than at the end of last year, while service companies grew more upbeat, according to a survey by the Institute for Supply Management.

Purchasing managers at U.S. factories said they anticipate sales will grow 4.5% this year, less than a 5.5% December prediction, according to the Tempe, Arizona-based group’s semiannual forecast issued today. By contrast, service providers estimated revenue will climb 4.8% this year, up from the 3.1% forecast in December.

Factory managers remain confident enough that they estimate spending on new equipment will climb by 6.2% in 2012, compared with a 1.9% increase projected in December, today’s report showed. Service providers forecast a 3.6% pickup in investment.

“Manufacturing continues to demonstrate its strength and resilience in the midst of global economic uncertainty and volatility,” Bradley Holcomb, chairman of the group’s factory committee, said in a statement.

Manufacturers projected employment will increase 1.4 percent for the rest of this year, while service companies predicted a 1.9% gain.

“The economy is in the U.S. is doing reasonably well,” Donald MacPherson, a senior vice president at W.W. Grainger Inc., said during a May 3 investor conference. The Lake Forest, Illinois-based company makes motors, power tools and pumps. “We don’t expect significant tailwinds from economic growth over the next several years. We expect modest growth.”

Raw Materials Costs

Factory leaders see the cost of raw materials rising 2.3% this year, the report showed. Service providers see a 2.6%  increase in input costs this year.

Earlier this month, the ISM reports showed manufacturing unexpectedly expanded in April at the fastest pace in almost a year as orders picked up. The ISM’s factory index climbed to 54.8 in April from 53.4 the prior month, figures showed May 1.

Two days after the factory gauge was released, the ISM services gauges showed those industries grew at a slower pace during the month. The ISM reported that its index of non- manufacturing companies declined to 53.5 in April. For both indexes, readings greater than 50 signal growth.

“We’re very pleased that the economy is on a steady path, certainly not robust, but steady,” Douglas Stotlar, president and chief executive officer of freight transportation company Con-way Inc., said during a second quarter earnings call on May 2. “We’re anticipating that we’ll just see that same type of demand through the reminder of the second quarter.”

Bloomberg News

 

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