U.S. purchasing and supply executives expect the nation’s economy to continue to grow throughout the remainder of 2011, despite rising materials prices, new findings indicate.

Manufacturers in the United States have a more optimistic outlook for sales, spending and hiring in 2011, yet prices for materials are seen climbing further, according to new findings from the Institute for Supply Management (ISM).

In its spring 2011 semiannual economic forecast, ISM reports that purchasing and supply executives at U.S. factories anticipate sales will rise 7.5 percent this year, up significantly from 5.6 percent forecast in December 2010. In fact, 68 percent of respondents expect business revenues will be 13.2 percent greater, 12 percent expect a 13.2 percent decline and 20 percent foresee no change.

“Much of manufacturing has emerged from the economic downturn and is experiencing significant growth,” Norbert J. Ore, chair of the ISM Manufacturing Business Survey Committee, said in a statement.

The 17 industries reporting expectations of growth in revenue during the year include: plastics and rubber products; fabricated metal products; primary metals; machinery; computer and electronic products; transportation equipment; food, beverage and tobacco products; printing and related support activities; wood products; chemical products; textile mills; electrical equipment, appliances and components; furniture and related products; and paper products.

Manufacturing managers report that their companies are currently operating at 83.2 percent of normal capacity, up from the 80.2 percent reported in December 2010 and the 72.8 percent reported in April 2010 — and marking the highest operating capacity since the 84.5 percent reported in December 2006.

Factory managers also estimate they will boost spending on new equipment by 17.9 percent in 2011, up from the 14.5 percent increase projected in December, the ISM report shows. Currently, 39 percent of respondents forecast increased capital expenditures in 2011, with an average increase of 53.3 percent, while 50 percent say they will spend the same in 2011 as they did in 2010. The 11 percent who report their capital spending will decrease expect an average drop of 28.9 percent.

Meanwhile, executives in all 18 manufacturing industries anticipate increased prices for materials through the remainder of this year.

“When asked to predict 2011 price changes, 83 percent of respondents expect the prices they pay to increase by 9.1 percent compared to the end of 2010. At the same time, 5 percent anticipate decreases averaging 4.1 percent,” the ISM report explains. “Including the 12 percent who expect no change in prices, survey respondents expect net average prices to increase 7.4 percent for the entire year of 2011, indicating that prices are expected to rise an additional 1.3 percent for the remainder of the year.”

Firms say they have already seen a sharp rise in prices so far this year. In the December 2010 forecast, respondents expected a 2.7 percent increase in prices paid over the first four months of 2011. However, they now report prices increased 6.1 percent during the period.

When asked how much of the commodity or input price increases they will be able to pass along in the form of higher prices to their customers, manufacturing respondents indicated they would be able to pass along an average of 34 percent of those prices.

“The recent surge in energy and commodity prices has crimped companies wary of passing on higher prices to frugal shoppers, but most economists expect the impact of price increases will be temporary,” Reuters reports.

Employment is expected to provide support.

Manufacturers project an employment increase of 2.9 percent for the rest of this year, with 42 percent expecting employment to be 8.4 percent higher and just 8 percent predict employment to be lower by 7.8 percent. The remaining 50 percent of respondents expect their employment levels to be unchanged for the remainder of 2011.

“The positive forecast for revenue growth and improved employment will drive the continuation of the recovery in the sector,” Ore said.

Earlier this month, ISM reported that the U.S. manufacturing sector posted strong growth through April, although the pace of expansion slowed somewhat due to rising commodity prices and scattered supply disruptions related to Japan’s March 11 earthquake.

When asked if they anticipated delays in their company’s U.S. operations due to supply chain failures resulting from the recent events in Japan, 23 percent of manufacturers in ISM’s latest report indicated they will experience delays and can maintain 59.6 percent of normal operating capacity. The remaining 77 percent foresee no problem due to supply constraints.

Recent

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Manufacturing Growth to Outpace Overall Economy

Small and Midsized Manufacturers More Optimistic about 2011

Resources

Semiannual Economic Forecast: Economic Growth to Continue throughout 2011
Institute for Supply Management, May 17, 2011

U.S. Factory, Services Revenue to Rise in 2011: ISM
by Leah Schnurr
Reuters, May 17, 2011

April 2011 Manufacturing ISM Report On Business
Institute for Supply Management, May 2, 2011

Quarterly Economic Forecast: …Growth to Continue at Moderate Pace
Manufacturers Alliance/MAPI, May 19, 2011