Manufacturing growth in the U.S. has been downgraded to 1.7% for 2023 following 10 successive interest rate hikes aimed at cooling down the economy to battle inflation. PHOTO by Pexels.
Manufacturing in the U.S. will continue its post-pandemic expansion but at a slower pace than previously forecast, according to the latest forecast from the Institute for Supply Management (ISM).
Manufacturing revenue is forecasted to grow by 1.7% this year, a significant difference from December’s forecast of 5.5% forecast.
ISM produces a monthly manufacturing index, dubbed the PMI, based on a survey of purchasing and supply executives in 18 industries. The same group was surveyed for the economic forecast. Ten of the 18 industries said they expected revenue gains for 2023. They included primary metals, transportation equipment, and machinery.
Forty percent of respondents say that revenues for 2023 will increase, on average, 11.6% compared to 2022. Twenty percent say revenues will decrease (14.6%, on average), and 40% indicate no change.
“With an operating rate of 82 percent 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 continues its comeback from the turmoil that began in 2020 and is expected to continue through this year,” ISM states in its report.
The downgraded forecast should come as no surprise considering the U.S. Federal Reserve Board has increased interest rates 10 times in little more than a year in its efforts slow the economy to combat inflation.