ISM finds economic improvement in 2025. Including wood products, furniture
Nathan Fertig via Unsplash

TEMPE, Ariz. — Economic improvement in the United States will continue in 2025, say the nation's purchasing and supply management executives in the December 2024 ISM Supply Chain Planning Forecast, formerly known as the Semiannual Economic Forecast. 

This positive news holds true for the wood products' manufacturing industry and the furniture manufacturing industry.

Revenues, the report said, are expected to increase in 17 of 18 manufacturing industries. Capital expenditures are expected to increase by 5.2 percent in the manufacturing sector (after a 5.6-percent increase in 2024). 

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

These projections are part of the forecast issued by Institute for Supply Management's (ISM) Business Survey panelists. The forecast was released today by Timothy R. Fiore, CPSM, C.P.M, Chair of the ISM Manufacturing Business Survey Committee, and by Steve Miller, CPSM, CSCP, Chair of the ISM Services Business Survey Committee.

Below is an edited version of the released report. For more information and a broader examination of the survey, click here.

Manufacturing summary
Expectations for 2025 are positive, as 60 percent of survey respondents expect revenues to be greater in 2025 than in 2024. The panel of purchasing and supply executives expects a 4.2-percent net increase in overall revenues for 2025, compared to a 0.8 percentage point increase reported for 2024. Sixteen of the 18 manufacturing industries expect revenue improvement in 2025, listed in order of largest to smallest projected increase: Computer & Electronic Products; Machinery; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Transportation Equipment; Miscellaneous Manufacturing; Paper Products; Primary Metals; Plastics & Rubber Products; Chemical Products; Nonmetallic Mineral Products; Wood Products; Printing & Related Support Activities; Furniture & Related Products; and Fabricated Metal Products.

"Manufacturing's purchasing and supply executives expect to see overall growth in 2025. They are optimistic about overall business prospects for the first half of 2025 and more excited about faster growth in the second half. According to the ISM® Report On Business, manufacturing grew for 28 consecutive months from June 2020 through September 2022, was unchanged in October and dipped into contraction in November 2022. The index has remained in contraction since, except for a reading of 50.3 percent in March 2024. Respondents expect raw materials pricing pressure to ease in 2025 and see first-half 2025 profit margins improving over the second half of 2024. Wages and employment will continue to grow. Manufacturers also predict growth in both exports and imports in 2025," said Fiore.

In the manufacturing sector, respondents report the companies operating at 82.3 percent of normal capacity, down 0.5 percentage point from the 82.8 percent reported in May 2024. Purchasing and supply executives predict that capital expenditures will increase year over year by 5.2 percent in 2025, compared to a 5.6-percent increase reported for 2024. Manufacturers expect employment in the sector to grow by 0.8 percentage point in 2025 relative to December 2024 levels, while labor and benefit costs are expected to increase an average of 3.3 percent. Respondents also expect the U.S. dollar to strengthen against the currencies of seven major trading partners in 2025.

The Business Survey Panel predicts that prices paid for raw materials will increase 3 percent during the first five months of the year, with an overall increase of 3 percent for 2025. This equates to a reported 3-percent increase in raw materials prices in 2024.

Operating rate
Manufacturing
Manufacturing purchasing and supply executives report their companies are currently operating at 82.3 percent of normal capacity. This is a 0.5-percentage point increase when compared to May 2024 (82.8 percent) and a decrease when compared to December 2023 (83 percent). The following seven industries — listed in order — are operating at or above the average rate of 82.3 percent: Petroleum & Coal Products; Paper Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Wood Products; Chemical Products; and Miscellaneous Manufacturing.

Production capacity
Manufacturing
Production capacity in manufacturing increased 1.7 percent in 2024, as 28 percent of purchasing and supply executives reported an average capacity increase of 10.6 percent, 12 percent reported an average decrease of 9.7 percent, and 60 percent reported no change. This compares to a May 2024 predicted increase in production capacity of 2.4 percent for 2024. Expectations for 2025 are for an increase of 4 percent. 

The 16 industries that expect an increase in production capacity in 2025 — listed in order — are: Electrical Equipment, Appliances & Components; Transportation Equipment; Furniture & Related Products; Primary Metals; Petroleum & Coal Products; Computer & Electronic Products; Fabricated Metal Products; Machinery; Paper Products; Miscellaneous Manufacturing; Wood Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Textile Mills; Chemical Products; and Nonmetallic Mineral Products.

The principal means of achieving increases in production capacity in 2024 were (in order of importance):

1)     More hours worked with existing personnel
2)     Additional personnel
3)     Additional plant and/or equipment
4)     Replaced equipment with technically advanced equipment.

Capital expenditures — 2024 vs. 2023
Manufacturing
Purchasing and supply executives report 2024 capital expenditures increased 5.2 percent on average when compared to 2023 levels. Expenditures for 2024 beat survey respondents' previous expectations, as they predicted an increase of 1 percent for the year in May 2024. The 33 percent of purchasers who reported increased capital expenditures in 2024 indicated an average increase of 30 percent, while the 20 percent who said their capital spending was reduced reported an average decrease of 21.2 percent. Forty-seven percent of respondents said their spend levels were unchanged in 2024. The 11 industries showing increases in capital expenditures for 2024 — listed in order of percentage increase — are: Food, Beverage & Tobacco Products; Paper Products; Furniture & Related Products; Computer & Electronic Products; Transportation Equipment; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Chemical Products; Fabricated Metal Products; Wood Products; and Machinery.

Predicted capital expenditures — 2025 vs. 2024
Manufacturing
Purchasing and supply executives expect capital expenditures to increase 5.2 percent in 2025. The 35 percent of respondents predicting increased capital expenditures in 2025 indicate an average increase of 26.2 percent, while the 22 percent who said their capital spending would be reduced predict an average decrease of 19.4 percent. The remaining 43 percent said they expect to spend the same in 2025 as in 2024. The 14 industries predicting increases in capital expenditures for 2025 — in the following order — are: Petroleum & Coal Products; Paper Products; Printing & Related Support Activities; Wood Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Primary Metals; Transportation Equipment; Computer & Electronic Products; Machinery; Food, Beverage & Tobacco Products; Textile Mills; Chemical Products; and Miscellaneous Manufacturing.

Labor and benefit costs — Predicted Rate Change End of 2024 vs. End of 2025
Manufacturing
Purchasing and supply executives expect higher overall labor and benefit costs for 2025. Sixty-nine percent of respondents expect labor and benefit costs to grow by an average of 5.1 percent for all of 2025, while the 2 percent forecasting lower costs project an average decrease of 5.3 percent. Including the 29 percent of respondents who believe costs will remain the same, the overall net rate of increase is expected to be 3.3 percent for the year. The nine industries expecting to pay an increase of 3.3 percent or greater — listed in order — are: Textile Mills; Petroleum & Coal Products; Primary Metals; Electrical Equipment, Appliances & Components; Paper Products; Wood Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Transportation Equipment.

Employment — Change in Overall Employment
Manufacturing
ISM's Manufacturing panelists report that sector employment decreased 1.1 percent in 2024 and forecast that employment will increase by 0.8 percentage point, on average, for the full year of 2025. Twenty-eight percent of respondents expect employment to be, on average, 6.6 percent higher in 2025, while 18 percent predict employment to be lower by an average of 5.7 percent. The remaining 54 percent of respondents expect their employment levels to be unchanged in 2025. The 11 industries predicting increases in employment in 2025 — listed in order — are: Plastics & Rubber Products; Food, Beverage & Tobacco Products; Wood Products; Machinery; Computer & Electronic Products; Transportation Equipment; Fabricated Metal Products; Paper Products; Furniture & Related Products; Miscellaneous Manufacturing; and Primary Metals.

 

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About the author
Larry Adams | Editor

Larry Adams is a Chicago-based writer and editor who writes about how things get done. A former wire service and community newspaper reporter, Larry is an award-winning writer with more than three decades of experience. In addition to writing about woodworking, he has covered science, metrology, metalworking, industrial design, quality control, imaging, Swiss and micromanufacturing . He was previously a Tabbie Award winner for his coverage of nano-based coatings technology for the automotive industry. Larry volunteers for the historic preservation group, the Kalo Foundation/Ianelli Studios, and the science-based group, Chicago Council on Science and Technology (C2ST).