Companies See Gains in Revenue in 2005

U.S. companies are more optimistic about the economy in 2005 than they were for this year, with increased revenue expected, a survey of purchasing and supply executives showed Wednesday. Even so, higher costs were a concern.

Fifty percent of services companies and 52% of manufacturers said the economy was likely to improve in the first six months of 2005 compared with the second half of 2004, the Institute for Supply Management reported. Revenue in 2004 will rise 7.8% for manufacturers and 5.9% for services firms, according to the survey of 400 businesses.

The survey by the institute, based in Tempe, Ariz., gave no specific growth forecast. A survey of U.S. corporate leaders by the Business Roundtable last week called for the economy to expand 3.5% next year, up from 3.4% predicted for 2004. The improvement in their outlook occurred amid a surge in prices for industrial materials, including oil.

“We’ve demonstrated tremendous resilience in the past year in the face of a number of obstacles,” said Robert DiClemente, chief U.S. economist at Citigroup Global Markets Inc. “We’ve still got relatively buoyant financial conditions.”

Manufacturers said they were worried about rising costs and the possibility that consumer spending will falter. Manufacturers expect prices to increase 4.4% in 2005 after rising 11.2% this year.

“Among manufacturers, there’s a guarded optimism about 2005,” said Norbert Ore, chairman of the institute’s business survey committee. “They’re asking, ‘What can the consumer continue to do?’ Some expect that the consumer is going to back off a little bit.”

Non-manufacturers said they expected price increases to average 3.6% next year after rising almost 5% this year. Services companies said their biggest concern in 2005 was the cost of energy. Manufacturers cited “prices and inflation.”

Factories expected their employment levels to rise slightly, by 1.6%, next year, and services companies predicted a 3.1% increase.