Economic Recovery Continues in 2010: Institute for Supply Management

Forty percent of non-manufacturing supply management executives expect their 2010 revenues to be greater than in 2009. They currently expect a 1.3 percent net increase in overall revenues for 2010 compared to a 4.5 percent decrease reported for 2009. The eight non-manufacturing industries expecting revenue improvement in 2010 over 2009 — listed in order — are: Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Finance & Insurance; Wholesale Trade; Retail Trade; Other Services(b); Information; and Agriculture, Forestry, Fishing & Hunting.

"Non-manufacturing supply managers report operating at 81.3 percent of their normal capacity, above the 80.1 percent reported in April 2009. They are cautiously optimistic about continued growth in the first half of 2010 compared to the second half of 2009, and they have a lower level of optimism about the next 12 months than they had last December for 2009," said Nieves. "They forecast that their capacity to produce products and provide services will rise by 0.9 percent during 2010, and capital expenditures will decrease by 6.7 percent from the 2009 level. Non-manufacturers also predict that their employment will decrease by 0.6 percent during 2010. Their major economic concerns are: weak economy; healthcare and benefits costs; credit crisis; labor costs; and high energy costs.”

Respondents in non-manufacturing industries expect that the prices they pay for materials and services will increase by 1.1 percent during 2010. They also forecast their overall labor and benefit costs will remain unchanged for 2010. Profit margins are reported to have decreased in the second and third quarters of 2009, and respondents expect them to increase between now and April 2010. Survey respondents indicate the increased use of strategic sourcing is the most frequently cited means of improving supply chains in 2010. Other improvement approaches include: product rationalization/demand management; supplier consolidation; improved inventory/asset management; and spend analysis/consolidation.