Companies Predict Slower Sales Growth
U.S. companies foresee slower revenue growth and higher prices this year than they did six months ago, a survey by the Institute for Supply Management showed Tuesday.
Manufacturers expect revenue in 2005 to increase 6.8% over 2004, a “moderate” decline from the 7.8% forecast in December, the trade group for purchasing executives said. Other companies, mostly services, expect a 5.3% rise, compared with 5.9% predicted in December.
The findings correspond to surveys that call for bloated inventories and higher energy prices to curb growth after the economy expanded 4.4% last year, the most since 1999. At the same time, the survey of about 350 companies showed that manufacturers were optimistic enough for capital spending plans to surge this year and payrolls to expand.
“In general 2005 is going to be a year of good growth, but we are starting to see some signs that the rate is coming down a bit after an extraordinary year in 2004,” said Norbert Ore, chairman of the institute’s business survey committee. “I don’t see any clouds on the horizon that would keep manufacturing from having a very respectable 2005.”
The U.S. economy may expand at a 3.4% rate this year after growing 4.4% last year, according to economists surveyed from April 29 to Friday by Bloomberg News. The projected increase is higher than the 3% average annual gain during the last three decades.
The survey by the institute, based in Tempe, Ariz., gave no growth forecast.
Even with the decline in revenue growth forecasts, some 72% of manufacturing firms expect revenue to be higher in 2005 compared with 2004, the institute’s survey found.
Factories expect capital spending to rise 9.8% this year, up from the 1.6% projected in December. Non-manufacturers expect such spending to rise 1.4% this year.
The survey of purchasing executives found that factories expected their employment levels to rise 1.2% for the rest of 2005, while non-manufacturers project a 1.3% rise during that time. Those forecasts are down from 1.6% for manufacturers and 3.1% for all other companies.
