Bloomberg News

U.S. Manufacturers Seen Leading Growth in 2012, ISM Says

December 06, 2011

(Updates with 2011 figures in fifth paragraph.)

Dec. 6 (Bloomberg) -- U.S. manufacturers are more optimistic about sales, spending and hiring for next year than service companies, a sign factories will remain at the forefront of the economic expansion, according to the Institute for Supply Management.

Purchasing managers at factories anticipate sales will grow 5.5 percent next year and capital investment will increase 1.9 percent, the Tempe, Arizona-based group’s semiannual forecast showed today. Revenue and spending will increase at a slower pace among service providers, which account for about 90 percent of the economy.

“Manufacturing has demonstrated its resilience throughout this challenging economic recovery period, with consistent growth dating back to August of 2009,” Bradley Holcomb, chairman of the group’s factory survey, said in a statement. Manufacturers “expect to see continued growth in 2012.”

The increase in factory demand next year may fall short of the improvement in 2011. The projected gain in 2012 sales compares with a 7 percent increase for this year. For the services industry, revenue is forecast to be stronger than the 1.5 percent gain in 2011.

Factory employment is projected to increase 1.3 percent in 2012, compared with a 1.1 percent projected rise at non- manufacturing companies. Sales in the services industry will increase 3.1 percent next year and investment spending will rise 0.1 percent.

ISM Factory Gauge

The factory gauge has averaged 55.4 so far this year, reaching a 2011 low of 50.6 in August and since rising to 52.7 last month. The service index has averaged 54.6 in 2011. It dropped last month to 52, its lowest since January 2010.

Growth in emerging markets is helping sustain demand for U.S.-produced goods. Deere & Co., the world’s largest farm- equipment maker, on Nov. 23 reported fiscal fourth-quarter profit and forecast 2012 earnings that topped analysts’ estimates.

“We expect sound farmer confidence and strong equipment demand,” investor communications manager Susan Karlix said on a conference call. “Globally, coming off 2011’s high levels, the 2012 industry outlook is for stable commodity prices and farm income.”

--Editors: Vince Golle, Carlos Torres

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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