Maintaining a vital and financially healthy manufacturing company continues to be a challenge. Concerns about tariffs and impact on access to raw materials, technical components and other items needed in the manufacturing of various products has been a cause for concern. However, the potential for a softening global economy along with issues finding qualified labor has turned one pressing challenge into three. Despite the concern, it appears industry companies are maintaining an overall positive outlook. According to the National Association of Manufacturing Outlook Survey – 3rd Quarter 2019, there is softening confidence about the future. The survey also uncovered other trends, including expected changes in sales, production, cost of raw materials, employee wages, and even capital investments. The information included in the survey provides excellent insights into what many may experience in the coming months. To help clients, prospects and others interpret the results, Selden Fox has provided a summary of key findings below.
About the Survey
The survey was conducted between August 20, 2019, and September 4, 2019, seeking critical insights from manufacturing companies of various sizes. In total, there 448 companies surveyed with 91 identifying as small manufacturers, 189 identifying as medium-sized manufacturers, and 168 identifying as large manufacturing companies.
The survey wanted to identify the overall outlook that respondents have about the coming year. While the number was down from the last survey, there were still a majority of respondents who expressed positivity. Overall 67.9% of respondents remain positive about their company’s outlook, 64.8% of small manufacturers, 74.1% of medium sized manufacturers, and 62.5% of large manufacturers expressed optimism. While changing conditions are making owners concerned, it’s clear that most still hold positive expectations.
The number of respondents expressing a production increase dropped from 2.4% to 1.8%. While it appears, the short term will experience a reduction in overall production, the survey did uncover that many respondents expect there to be an upswing within the year. What’s interesting is that medium sized manufacturers were far more positive in growth forecasts than others, anticipating a 2.7% production growth over the next twelve months.
Cost of Raw Materials
Given all the news about tariffs, it’s no surprise that respondents expect there to be an increase in the cost of raw materials. According to the survey, respondents indicated they expect the cost of materials to increase by 2.4%. This is encouraging because in the last edition of the survey they were expecting an increase north of 3%.
An area that many Chicago manufacturing companies are struggling with is finding qualified labor to meet employment needs. The good news is that most respondents expect full time employment demands to increase by 1% over the coming year. While this number is far lower than the past editions of the survey, it does give some relief to those struggling to find qualified labor.
A key area where the survey wanted to investigate is in understanding how manufacturing companies are managing through skill shortages. According to respondents,
- 69% are creating or expanding internal training programs,
- 7% are working more closely with staffing agencies,
- 0% are corroborating with educational institutions on skills certification programs,
- 7% are encouraging possible retirees to stay in their roles longer, and
- 2% are considering moving operations to a different location.
This puzzle is a difficult one to solve, but good to see so many options being pursued.
The role of technology in manufacturing is an interesting one. The survey looked to uncover how widely digital manufacturing has been embraced. According to the survey, 64.4% of respondents have made one or several parts of their process digitally enabled, 19.7% have not made any efforts and 15.9% are uncertain about what changes they will make.
The information in these surveys provides insight into the condition, expectations, and status of the industry as a whole. If you have questions about the information outlined above, or need assistance with a tax, financial reporting or other accounting matter, Selden Fox can help. For additional information please call us at 630.954.1400 or click here to contact us. We look forward to speaking with you soon.