The U.S. economy will continue softly expand for the rest of 2023, according to the Institute for Supply Management’s spring 2023 semiannual economic forecast. Expectations for the remainder of 2023 are similar to those expressed in the ISM’s forecast from December despite continued inflation and geopolitical uncertainty.

Manufacturing Summary

Revenue for 2023 is expected to increase in the manufacturing sector by 1.7% on average, which is 3.8% lower than the December 2022 forecast of 5.5% and 7.6% lower than the 9.3% year-over-year increase reported for 2022 overall. Forty percent of respondents said that revenues for 2023 will increase by 11.6% on average compared to 2022, while 20% said revenues will decrease (14.6% on average) and another 40% indicate there will be no change.

With an operating rate of 82% and projected increases in capital expenditures (0.4%), prices paid for raw materials (2.3%) and employment (0.5%) by the end of 2023, manufacturing is continuing its comeback from the turmoil that began in 2020 and is expected to continue through this year, according to the ISM.

“With 10 manufacturing sector industries expecting revenue growth in 2023 and 11 industries expecting employment growth in 2023, panelists forecast that recovery will continue the rest of the year, albeit somewhat softer than originally expected. Sentiment in each sector was generally consistent with industry performance reports in the April 2023 Manufacturing ISM Report on Business, as well as the fall semiannual economic forecast conducted in December,” Timothy R. Fiore, CPSM, CPM, chair of the ISM’s manufacturing business survey committee, said.

Ten of 18 manufacturing industries reported projected revenue increases for the rest of 2023, including primary metals, transportation equipment and machinery.

Services Summary

In the services sector, respondents expect a 2.7% net increase in overall revenues for the rest of 2023, which is 0.4% lower than the 3.1% increase forecast in December 2022. Thirty-eight percent of respondents said that revenues for 2023 will increase by 10.2 percent on average compared to 2022. Meanwhile, 11% expect their revenues to decrease (11.1% on average), and 51% indicated no change.

“The services sector will continue to grow for the rest of 2023. Services companies are currently operating at 91% of normal capacity. Supply managers indicate that prices are expected to increase 4.3% over the year, reflecting increasing inflation. Employment is projected to increase 0.7%,” Anthony S. Nieves, CPSM, CPM, APP, CFPM, chair of the ISM’s services business survey committee, said.

Fourteen of 18 services industries expect revenue increases in 2023, including retail trade, finance and insurance, and transportation and warehousing.