Chicago manufacturing companies seeking to maintain a financially healthy and robust business face many challenges. Not only are there issues with attracting and retaining a quality workforce, but management must deal with increasing health care/insurance costs, rising raw materials prices, transportation and logistics issues, and slowing export sales. All of this, against the impact that increasing trade uncertainties currently have on industry businesses. According to the National Association of Manufacturers (NAM) Manufacturing Outlook Survey (Second Quarter 2019), these are exactly the most pressing challenges facing the manufacturing industry.
The survey also uncovered several other issues pertinent to manufacturing companies such as expected growth rate of product prices, production, and changes to costs of raw materials and other prices. The findings help to paint a picture of what changes manufacturing companies can expect over the coming year. To help clients, prospects, and others interpret the results, Selden Fox has provided a summary of the key findings below.
About the Survey
The nationwide survey was conducted between May 22 and June 5, 2019, and includes responses from 689 participants. The size of companies ranged from those with fewer than 50 employees to those with more than 500 employees. There were 155 responses from small manufacturers, 337 responses from medium-sized manufacturers, and 197 from large manufacturers.
Key Survey Findings
Top Concerns in 2019
Uncovering the top issues and business challenges faced in the industry was an area of interest. According to the survey,
- 68% indicated that attracting and retaining a quality workforce was a concern
- 56% indicated trade uncertainties
- 55% indicated rising healthcare costs
- 46% indicated increasing raw material costs
- 31% identified changes to transportation and logistics costs.
Other concerns included slower export sales, unfavorable business climate (regulations and taxes), and challenges with access to capital.
The study also assessed sales growth expectations over the next year. According to the survey, there was an average expected increase in sales of 3.4%, representing a 1% decline from the previous survey. Of the survey respondents,
- 14% expect sales to increase more than 10%
- 25% expect an increase of 5% to 10%
- 26% expect an increase up to 5%
- 21% expect sales to stay about the same
- Roughly 10% of respondents expect there to be a decline in overall sales
While there is still a good outlook for sales in the coming year, it’s clear that optimism is beginning to diminish.
Raw Materials Cost
The price of finished products is partially determined by the cost of raw materials. The study examined the expected changes to the cost of raw materials over the coming year. According to the survey,
- 6% expect the cost of raw materials to increase more than 10%
- 15% of respondents expect an increase of 5% to 10%
- 45% expect an increase of up to 5%
- 20% expect the price to remain the same
- Only 7% of respondents expect the costs to decrease
The impact of increased sales should also result in increased production demand. According to the survey,
- 13% expect production to increase more than 10%
- 27% expect an increase of 5% to 10%
- 26% expect an increase of up to 5%
- 22% expect production to stay the same
- Only about 10% expect production levels to decline over the same period
Considering the challenges associated with attracting and retaining talent, the study asked respondents for the expected changes in full-time employment over the coming year. According to the survey,
- 4% expect to increase full-time employees by more than 10%
- 12% expect an increase between 5% and 10%
- 32% expect an increase up to 5%
- 40% expect there to be no change
- Roughly 10% of respondents expect there to be some decrease in the number of full-time employees
While there are many challenges facing Chicago and Illinois manufacturing companies, it appears there is still optimism about the future. The good news is that sales and production are not expected to decline based on current conditions. If you have questions about the survey findings or need assistance with a manufacturing tax, audit, or consulting issue, Selden Fox can help. For additional information please call us at 630.954.1400 or contact us now. We look forward to speaking with you soon.