The U.S. manufacturing sector will grow in 2011, with manufacturing revenue increasing by 5.6% according to the Institute for Supply Management (ISM) semi-annual forecast released.

The overall forecast projects optimism about the U.S. economy for 2011. The manufacturing sector, overall, is positive about prospects in 2011 with revenues expected to increase in 16 of 18 industries. ISM also predicts that business investment, a major driver in the U.S. economy, will increase substantially in the manufacturing sector.

The 16 manufacturing industries expecting improvement over 2010 — listed in order — are: Primary Metals; Fabricated Metal Products; Petroleum & Coal Products; Apparel, Leather & Allied Products; Transportation Equipment; Miscellaneous Manufacturing; Furniture & Related Products; Plastics & Rubber Products; Machinery; Textile Mills; Wood Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Chemical Products; and Paper Products.

"Manufacturing purchasing and supply executives have expectations for continued growth and are optimistic about their organizations' prospects as they consider the first half of 2011, and they are even more positive about the second half," said Norbert J. Ore, CPSM, C.P.M., chair of the ISM Manufacturing Business Survey Committee. "While 2010 has been a year of recovery in manufacturing, our forecast sees improvements in both investment and employment in 2011. Respondents expect cost pressures in 2011 to be somewhat greater than in 2010. Manufacturing growth is now in its 16th consecutive month as measured by and reported in the monthly Manufacturing ISM Report On Business®."

In the manufacturing sector, respondents report operating at 80.2% of their normal capacity, up from 72.8% reported in April 2010. Purchasing and supply executives predict that capital expenditures will increase by 14.5% in 2011, compared to a 5.9% increase reported for 2010. Survey respondents also forecast that they will reduce inventories in an effort to improve their purchased inventory-to-sales ratio in 2011. Manufacturers have an expectation that employment in the sector will increase by 1.8%, while labor and benefits costs are expected to increase an average of 1.9% in 2011. Manufacturing purchasers are predicting strength in exports and imports in 2011. They also expect the U.S. dollar to weaken on average against the currencies of major trading partners.

The panel also predicts the prices they pay will increase 2.7% during the first four months of 2011, and will increase an additional 1.3% during the balance of the year, with an overall increase of 4% for 2011. Survey respondents expect to realize supply chain improvements through improved inventory/asset management; cost reduction; supplier development/better metrics; supplier consolidation; and better risk management.