By Paul Kiernan 

WASHINGTON -- Businesses in the U.S. are less optimistic about the outlook for the coming year than they were 12 months ago, though many still expect sales, hiring and investment to rise in 2019, according to a survey released Monday.

Compared with December 2017, fewer purchasing and supply executives believe the next year will be better than the last, the Institute for Supply Management said in its semiannual economic forecast. Just under half of survey respondents believe 2019 will be better than 2018, with the rest saying it will be the same or worse.

Businesses' projections for labor and materials costs have ticked higher in recent months as steady hiring has pushed the U.S. unemployment rate down to a 49-year low, while tariffs threaten to drive up costs for imported goods. Policy makers at the Federal Reserve pay attention to ISM data and other surveys because they believe business expectations, particularly regarding inflation, can become self-fulfilling.

The ISM said labor and benefits costs are expected to rise 2.5% in the manufacturing sector and 3.2% in the nonmanufacturing sector in 2019, compared with year-ago forecasts of 2.1% and 2.6%, respectively. A large majority of survey respondents said they've had difficulty hiring workers to fill open positions, and a growing majority of companies also report raising wages to recruit new hires.

Purchasing and supply executives in the manufacturing sector said they expected the prices their businesses pay are expected to rise 3.3% in 2019 after a gain of 5.1% this year. In the nonmanufacturing sector, price increases are seen accelerating to 3.6% next year from 2% this year.

Compared with the ISM's last economic survey, conducted in May, fewer companies now expect tariffs to raise the price of their goods to customers, or to cause delays and disruptions in their supply chains.

But 65% of executives at manufacturers said their companies are evaluating new sources of supply and other changes as a result of tariffs the Trump administration has either imposed or threatened on a wide range of imports.

Write to Paul Kiernan at paul.kiernan@wsj.com

(END) Dow Jones Newswires

December 10, 2018 10:14 ET (15:14 GMT)