As global economic recovery remains uneven, how can businesses accurately identify future growth opportunities? The Institute for Supply Management's (ISM) December 2024 Supply Chain Planning Forecast serves as a comprehensive economic health check, revealing divergent recovery trajectories between US manufacturing and services sectors.
Based on in-depth surveys of domestic procurement and supply chain executives, the report provides crucial insights for business leaders to develop targeted strategies addressing next year's challenges and opportunities.
Manufacturing: Structural Adjustments Amid Steady Growth
US manufacturing revenue grew 0.8% in 2024, below May's 2.1% projection but demonstrating resilience. ISM forecasts 4.2% revenue growth for 2025, with 60% of respondents expressing optimism about expansion. This outlook reflects sector confidence while signaling the need for strategic adaptation.
Ten manufacturing industries achieved revenue growth in 2024:
- Computers and electronics
- Miscellaneous manufacturing
- Furniture and related products
- Printing and support activities
- Electrical equipment and components
- Food, beverage and tobacco products
- Transportation equipment
- Nonmetallic mineral products
- Paper products
- Wood products
This growth reflects progress in technological innovation, consumer upgrades and infrastructure development. However, varying performance across industries underscores the need for tailored competitive strategies.
Manufacturing capital expenditures rose 5.2% in 2024, significantly exceeding May's 1% projection. ISM anticipates another 5.2% increase in 2025, indicating sector investment in productivity, capacity expansion and technological upgrades.
Notably, 33% of respondents reported average capital expenditure increases of 30%, while 20% saw average decreases of 21.2%, reflecting divergent investment approaches across the sector.
Key manufacturing trends include:
- Prices: Increased 3% in 2024, with 3% growth projected for 2025
- Employment: Expected 0.8% growth in 2024
- Capacity: Grew 1.7% in 2024, with 4% growth projected for 2025
- Operating rates: Currently at 82.3% of normal capacity
Timothy Fiore, Chair of ISM Manufacturing Business Survey Committee, noted: "Manufacturing executives anticipate overall 2025 growth with optimism for the first half and greater excitement about accelerated second-half expansion."
Fiore added that while the sector remained in contraction for most of 2024, respondents expect easing raw material pricing pressures in 2025, with higher margins projected for the first half compared to late 2024. Both exports and imports are forecast to grow.
Services: Robust Expansion and Structural Optimization
The services sector demonstrated stronger momentum in 2024, with 3.7% revenue growth exceeding May's 2.9% forecast. Fifty-one percent of respondents reported average revenue increases of 9.6%, while 11% saw average declines of 10.5%.
All 18 services industries achieved revenue growth, indicating broad-based sector expansion and adaptation to market changes.
Services capital expenditures are projected to grow 5.1% in 2025, with 33% of respondents anticipating average increases of 21%, signaling investment in service quality, range expansion and digital transformation.
Capacity utilization stood at 87.4% in 2024, slightly below May's 88.6% projection but remaining robust.
Key services trends include:
- Capacity: Grew 3.2% in 2024
- Prices: Increased 5.2% in 2024, with 5.3% growth projected for 2025
- Employment: Expected 0.8% growth in 2025
- Labor costs: Projected to increase 3.5% in 2025
Steve Miller, Chair of ISM Services Business Survey Committee, stated: "Services executives remain optimistic about 2025, anticipating continued growth and increased capital investment. They forecast 2.8% improvement in production/service delivery capacity alongside 5.1% capital expenditure growth."
Strategic Responses: Capturing Growth Opportunities
The divergent recovery paths demand tailored strategies from businesses:
Manufacturers should consider:
- Prioritizing technological innovation and R&D investment
- Optimizing supply chain management and supplier collaboration
- Pursuing market diversification to mitigate risks
- Investing in workforce development and skills training
Services firms should focus on:
- Accelerating digital transformation initiatives
- Enhancing customer experience and loyalty
- Innovating service models and delivery methods
- Developing competitive talent acquisition strategies
The ISM report provides critical market intelligence for strategic decision-making. Businesses that accurately interpret sector trends and implement responsive strategies will be best positioned to navigate economic uncertainties and achieve sustainable growth.