The Institute for Supply Management (ISM), the procurement-oriented organization affiliated with Arizona State University and that publishes the well-followed monthly Purchasing Managers Index (PMI), is fresh out with a bullish economic forecast for US manufacturers in 2025.

In the December 2024 “ISM Supply Chain Planning Forecast,” formerly known as the “Semiannual Economic Forecast,” Manufacturing revenues are expected to increase in 17 of 18 manufacturing sectors ISM tracks in the PMI, as well as 16 of 18 services-sector industries.

Supply Chain Digest Says...   the top means of adding capacity was actually having workers toil for more hours, followed by adding more workers. Physically adding more capacity was only third place approach.     What do you say?   Click here to send us your comments       Click here to see reader feedback

ISM forecasts capital expenditures are expected to increase by 5.2% in the manufacturing sector next year (after a 5.6% increase in 2024).

In 2025, employment is expected to grow by 0.8 percent in manufacturing and 0.8 percent in services. After projected modest growth in manufacturing and services in the first half of the year, growth in the second half is projected to accelerate in manufacturing and maintain momentum in the services sector.

These projections are part of the forecast issued by ISM Business Survey panelists, from which the monthly PMI data is collected.

Manufacturing Summary

Expectations for 2025 are positive, with 60% of survey respondents expecting revenues to be greater in 2025 than in 2024. The panel of purchasing and supply executives expects a 4.2% net increase in overall revenues for 2025 compared to a 0.8 percentage point increase reported for 2024.

That as the PMI as been below the key 50 mark that separates US manufacturing expansion from contraction for 24 out of the past 25 months.

In other positive data, manufacturing respondents see first-half 2025 profit margins improving over the second half of 2024.

However, as noted above, the increase in jobs is projected to be modest, forecast to be up just 0.8 percentage point in 2025 relative to December 2024 levels.

Source: ISM

Respondents also reported that on average they were operating at 82.3% of normal capacity, down 0.5 percentage point from the 82.8% reported in May 2024. It also represented a slight decline when compared to December 2023’s 83%.

When it comes to capacity itself, production capacity in manufacturing increased just 1.7% in 2024, as 28% of purchasing and supply executives reported an average capacity increase of 10.6%, 12% reported an average decrease of 9.7%, and 60% reported no change.

ISM says expectations for 2025 are for an increase in capacity on average of 4%.

However, the top means of adding capacity was actually having workers toil for more hours, followed by adding more workers. Physically adding more capacity was only third place approach.

After a May 2024 forecast of a 1.9-percent increase in prices paid for raw materials in 2024, survey respondents now report price increases averaging 3% for the year. The 56% who say their prices are higher now than at the end of 2023 report an average increase of 7.5%, while the 20% who report lower prices indicate an average decrease of 6%.

However, 59% of purchasing and supply executives expect the prices they pay to increase in the first five months of 2025 by an average of 6%.

There is a lot more in the full report, available here: ISM Semi-annual Forecast

What are your thoughts on this ISM forecast? Let us know your thoughts at the Feedback section below.

Your Comments/Feedback