A recently published report by the National Association of Manufacturers shows that optimism is on the rise amongst American manufacturing companies. This stands in sharp contrast to the last year where many Chicago manufacturers were forced to operate at reduced capacity due to government orders and supply chain issues. The Manufacturer’s Outlook Survey, First Quarter 2021, reflects the highest optimism rate since the first quarter of 2019. It is fueled by expected increases in new sales, overall production, capital investments, inventory, and product prices. Despite the good news, there remain many challenges including continuing cost increases of raw materials, insurance expenses, transportation, and workforce management issues which represent real obstacles. To help clients, prospects, and others, Selden Fox has provided a summary of the survey results below.
About the Survey
The survey was conducted between February 19 and March 5, 2021. It includes responses from 450 manufacturers ranging in size from small to large. Specifically, responses were gathered from 102 small manufacturers, 240 from medium-sized manufacturers, and 108 from large manufacturers. In terms of employee size, 24% have more than 500 employees, 53.33% have between 50 to 499 employees and 22.67% have less than 50 employees.
Key Survey Findings
- Overall Business Outlook – As the impact of the pandemic continues to subside, the survey wanted to understand the overall outlook for industry companies. Results were that 27.3% reported having a very positive outlook, 60.22% somewhat positive, 10.67% somewhat negative, 1.78% very negative. It appears that confidence is returning as more than 87% of respondents have a positive outlook.
- Current Business Challenges – Despite the positive outlook, there are still significant business challenges that must be addressed. The survey found that 76.22% of respondents identified increased raw material costs as a top issue, 50.89% rising insurance costs, 50.22% rising transportation costs, 44% an unfavorable business climate, 29% trade uncertainties (including tariffs), and 17.33% weaker global demand and slower export sales.
- Overall Sales – To understand how manufacturing companies will perform despite identified challenges, the survey wanted to identify how respondents saw overall sales being impacted because of these challenges. The survey found that 22.49% of respondents expect sales to increase more than 10 percent, 32.52% expect sales to increase between 5 and 10 percent, 24.28% expect sales to increase up to 5 percent, and 13.81% expect no changes. Less than 7% expect there to be any level of decline in sales.
- Full-Time Employment Changes – Given the increasing demand for services, the survey inquired about expected employment changes in the coming year. It found that 8% of respondents expect an increase of more than 10 percent, 17.78% expect an increase between 5 to 10 percent, 34.44% expect an increase of up to 5 percent, and 35.66% expect no change. Conversely, less than 6% expect to experience any decline in full-time employment needs.
- Production Level Changes – The survey looked to compare production level changes between the fourth quarter of 2020 and the first quarter of 2021. It was discovered that 49.89% of respondents reported higher production, 33.18% no change, 15.59% lower production level, and 1.34% are uncertain. The quarter-over-quarter comparison illustrates why many manufacturers have become optimistic about the future.
It is clear from the findings that the Chicago manufacturing industry will continue to grow. Increased sales will continue to propel production which will drive new employee hiring. The result is more profit potential. If you have questions about the information outlined above or need assistance with an audit or tax issue, Selden Fox can help. For additional information call us at 630.954.1400 or click here to contact us. We look forward to speaking with you soon.