Economic improvement in the United States will continue in 2022, according to the Institute for Supply Management’s December 2021 semiannual economic forecast. This expansion will continue a growth trend that began in June 2020, as indicated in the ISM’s monthly Report on Business. Revenues are expected to increase in 15 of 18 manufacturing industries and 17 of 18 services sector industries. Capital expenditures are expected to increase by 7.7% in the manufacturing sector (after a 12.1% increase in 2021) and increase by 10.3% in the services sector. The manufacturing employment base is expected to grow by 1% following an increase of 3.3% in 2021. Compared with the first half, growth in the second half of the year is projected to cool slightly in manufacturing and accelerate in services.

Manufacturing Summary

Expectations for 2022 are positive, as 65% of survey respondents expect revenues to be greater in 2022 than in 2021 in the manufacturing sector. The panel of purchasing and supply executives expects a 6.5% net increase in overall revenues for 2022 compared with the 14.1% increase reported for 2021. Fifteen of the 18 manufacturing industries expect revenue improvement in 2022. Those industries — listed in order of largest to smallest projected increase — are: apparel, leather and allied products; machinery; computer and electronic products; fabricated metal products; transportation equipment; primary metals; miscellaneous manufacturing; chemical products; furniture and related products; food, beverage and tobacco products; electrical equipment, appliances and components; petroleum and coal products; printing and related support activities; nonmetallic mineral products; and paper products.

“Manufacturing’s purchasing and supply executives expect to see strong growth in 2022,” Timothy R. Fiore, CPSM, CPM, chair of the ISM’s manufacturing business survey committee, said. “They are optimistic about overall business prospects for the first half of 2022, with business continuing to expand through the second half, though at slightly lower rates. Manufacturing experienced 18 consecutive months of growth from June 2020 through November 2021, with the composite PMI registering above 60 in nine of the last 12 months of that time frame. Respondents expect raw materials pricing pressure to increase in 2022, as well as improved profit margins over H2 2021. Wages and employment will continue high rates of growth as hiring slows. Manufacturers also predict growth in both exports and imports in 2022.”

In the manufacturing sector, respondents reported operating at 88.7% of their normal capacity, up 0.4% from the 88.3 percent reported in May 2021. Purchasing and supply executives predict that capital expenditures will increase by 7.7% in 2022 over 2021, which compares with the 12.1% increase reported for 2021 over 2020. Manufacturers expect employment in the sector to grow by 1% in 2022 relative to December 2021 levels, while labor and benefit costs are expected to increase an average of 4.7%. Respondents also expect the U.S. dollar to weaken against six of the seven currencies of major trading partners in 2022, while it is expected to strengthen relative to the Mexican peso.

The panel predicted that prices paid for raw materials will increase 8.2% during the first five months of the year, with an overall increase of 8.1% for 2022. This compares to a reported 14.5% increase in raw materials prices between the end of 2020 and November of 2021.

Services Summary

Fifty-four percent of services supply management executives expect their 2022 revenues to be higher than in 2021. They expect a 4.3% net increase in overall revenues for 2022 compared with a 4.8% increase reported for 2021. The 17 industries expecting revenue increases in 2022 — listed in order of largest to smallest projected increase — are: mining; accommodation and food services; information; arts, entertainment and recreation; finance and insurance; wholesale trade; management of companies and support services; agriculture, forestry, fishing and hunting; construction; utilities; professional, scientific and technical services; other services; retail trade; public administration; transportation and warehousing; educational services; and healthcare and social assistance.

“Services supply executives report operating at 89.4% of their normal capacity, the same as the 89.4% reported in May 2021,” Anthony S. Nieves, CPSM, CPM, APP, CFPM, chair of the ISM’s services business survey committee, said. “They are optimistic about continued growth in the first half of 2022 and more growth for the second half, with a projected increase in growth rate for capital reinvestment. They forecast that their capacity to produce products and provide services will rise by 3.3% during 2022, and capital expenditures will increase by 10.3%. Services panel members also predict their overall employment will increase by 1% during 2022.”

Respondents in services industries expect the prices they pay for materials and services to increase by 8.9% during 2022. They also forecast that their overall labor and benefit costs will increase 6.1%. Profit margin decreases were reported in the second and third quarters of 2021, but respondents expect them to increase between now and May 2022.