US manufacturing firms expect higher prices from tariffs: ISM

In its semi-annual economic forecast, the Institute for Supply Management found 74 percent of manufacturing companies believed the US tariffs would "raise the price of the goods that you produce and deliver to your customers"
AFP

Washington (AFP) – Nearly three fourths of American manufacturing firms and half of services companies expect the tariffs imposed by the US and China will increase prices, and a large share expect supply disruptions, according to an survey released Monday.

The threats and counter-threats of tariffs on tens of billions of dollars in exports exchanged between the United States and China, as well as between the United States and Europe, have rattled financial markets in recent weeks due to the fear they could spark a trade war that would derail the global economic recovery.

And Washington does not appear to be much closer to a solution after a high-level US delegation ended two days of talks in Beijing last week without announcing any breakthroughs.

Companies surveyed by the Institute for Supply Management had been reporting rising prices for the past two months, including sharp spikes in steel and aluminum.

And many executives in corporate earnings reports also reported seeing rising costs, and were planning to increase prices to consumers.

In its semi-annual economic forecast released Monday, ISM said 74 percent of manufacturing companies and 50 percent of services firms believed the tariffs would “raise the price of the goods that you produce and deliver to your customers.”

Manufacturers expect an average price hike of 5.4 percent, while the services firms put the figure at just over seven percent, the survey showed.

Meanwhile, close to 60 percent of firms in both sectors expect “delays and disruptions” in their supply chain due to the tariffs.

This too could lead to price increases and companies have already been complaining about logjams in deliveries, in part because of the lack of truck drivers.

Companies around the country have reported difficulties finding workers to fill open positions and this survey showed 78 percent of manufacturing companies and 64 percent of services firms have struggled to hire in the past six months.

ISM reported that about half of the manufacturers had raised wages, compared to just a third of services firms.

The survey showed firms in both sectors were generally upbeat about their prospects for continued growth this year.

“However, finding and onboarding qualified labor and being able to pass on raw material price increases will ultimately define manufacturing revenues and profitability,” said Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee.

However, there was a sharp decline in the share of firms expecting to increase capital expenditures this year, compared to the December survey. That could be a reflection of the uncertainty over the trade disputes, which business have warned could hurt growth this year.

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