American Firms See Growth in 2019 Despite Headwinds From Tariffs
(Bloomberg) -- U.S. companies forecast a bright outlook for 2019, with gains across profit, employment and production, even as an escalation of the trade wars loom.
Almost two-thirds of manufacturers and about 57 percent of service providers expect their revenue in 2019 to surpass 2018’s, though the gain may be smaller than this year’s increase, according to a semiannual survey by the Institute for Supply Management released Monday. At the same time, tariffs and finding workers in a tight labor market remain concerns for firms, amid data indicating a moderation in the labor market and some cracks in consumer sentiment.
- The survey suggests U.S. economic growth will continue apace in 2019, with manufacturers and service providers forecasting increases in capital expenditures, revenues and employment.
- Respondents expect prices they pay to increase by more than 3 percent in 2019, though there’s less concern about the price effect of tariffs in this survey than the prior one in May. Two-thirds of manufacturers are seeking new supply chains as a result of U.S. tariffs on imports, and about half say they’re doing so as a result of retaliatory levies. Half of factories and nearly a quarter of non-manufacturers say tariffs have forced them to raise prices for customers.
- On wages and hiring, about three quarters of both manufacturers and service companies said they’ve had trouble finding workers over the past six months. About 57 percent of each group is raising wages to recruit new employees, up from May’s tally.
- Manufacturers expect a 2019 revenue increase of 5.7 percent following 5.8 percent in 2018, while capital expenditures are projected to rise by less than half the pace of this year. Factories predict prices paid for materials will climb at a slower pace than 2018.
- Non-manufacturing firms foresee a slower revenue gain in 2019, while capital expenditures will accelerate.
- Manufacturers said profit margins “decreased slightly on average” during the second and third quarters.
- The survey was conducted in November among the more than 800 companies who respond to the ISM’s regular poll that produces the group’s monthly gauges of manufacturing and services.
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