Manufacturing Outlook Record High in 2019
The optimistic outlook for manufacturing companies in Kentucky, Ohio, Indiana and across the United States has reached a record high. It appears that many of the changes ushered in through tax reform combined with pro-growth policies enacted by the current administration are allowing manufacturing companies to seize new opportunities in the sector. According to the National Association of Manufacturers (NAM) 2019 1st Quarter Manufacturers’ Outlook Survey, 89.5% of respondents indicated they are somewhat or very optimistic about their company’s outlook. This represents an almost 2% increase in optimism over the last quarter of 2018. It appears that not only do manufacturers believe there will be an increase in demand and growth in the coming months, but also an increase in the need for full time employees and employee wages. The concerns identified in the survey focus on the nation’s aging infrastructure, the possibility of a “rollback” of tax reform changes and rising insurance costs. While the overall outlook is very high, these are some of the concerns weighing on leaders’ minds. To help clients, prospects and others understand these trends, Barnes Dennig has provided a summary of key survey findings below.
About the Survey
The survey was conducted electronically of over 466 members of NAM and all manufacturing companies. Responses were received from 104 small size manufacturers, 230 medium size manufacturers and 132 large manufacturers. The survey was issued in February 2019, and responses were received from the field between February 16 – March 1, 2019.
Key Survey Findings
- Expected Sales – One indicator of expected growth are the projected changes to level of sales to be made. According to the survey, respondents expect a sales growth of 4.4% over the coming months, which represents a slight increase from the prior quarter. The increase in expected sales growth represents the ninth straight quarter where respondents expected growth to be over 4%. At the same time, 77.4% of respondents expect higher sales over the next year with 46.6% expecting to see revenue gains of 5% or more.
- Production Growth – It should come as no surprise that there would also be an expected increase in the amount of production to match the sales increase. According to the survey, respondents expect a 4.4% increase in growth production over the coming months. As with sales, the anticipated production growth has also exceeded 4% for nine straight quarters. Specifically, 76.5% of respondents expect production to grow over the next year, while 46.7% expect output to exceed 5% or more.
- Employment Changes – To understand how the expected growth will impact full time employment, the survey asked about expected changes to employment levels over the same period. According to the survey, full-time employment is expected to increase to 2.1% over the next 12 months. While slightly lower than the last quarterly survey, the results continue to reflect a tight labor market. What’s interesting is that almost 54% of respondents expect a 5% or more increase in hiring over the next year.
- Employee Wages – As the need for more full-time labor persists, the survey wanted to discover the overall impact on employee wages. According to the survey, respondents anticipate a 2.3% increase in employee compensation (excluding non-wage compensation such as benefits). While the overall average is the same as last quarter, it’s interesting to note that 34% expect wages to increase 3% or more over the coming year.
- Price of Raw Materials – One area of concern for many manufacturers is the price of raw materials. In fact, it’s expected there will be a 3.3% increase in the cost of raw materials over the coming year. While this number represents a decline over the prior quarter, it does reflect the concern held by many that the cost of these inputs will be rising in the foreseeable future.
- Changes to Product Price – Since the cost of raw materials is expected to increase, it’s logical to assume there would be a corresponding change to product price. In fact, survey participants expect product prices to increase 2.4% over the coming year. The survey also found that 49.7% project price increases for their products of 5% while 16.2% expect a price growth of more than 5% over the coming year.
- Cost of Health Insurance – As noted early, a key area of concern for many is the increasing costs of healthcare and other insurance. To determine the impact expected by manufacturers, the survey inquired about expected cost changes. Based on the report, industry companies expect an average increase in insurance costs of 6.7% over the coming year. Although slightly lower than the prior survey, the result underscores the cost concerns manufacturers are facing.
The manufacturing industry is reeling with record high optimism based on the findings in this survey. There appears to be broad opportunity in the market to capture. When contemplating growth opportunities, it’s essential to partner with an advisor who can help you navigate the process. If you have questions about the survey findings, what it means for your business, or need assistance with a manufacturing tax, audit or accounting issue, Barnes Dennig can help! For additional information call us at 513-241-8313 or click here to contact us. We look forward to speaking with you soon.
Join us as we Reveal Benchmarking Results for Manufacturers
Barnes Dennig, North Side Bank and Trust, and USI Insurance will once more study manufacturers’ salaries, benefits and other benchmarking metrics, and release our findings at this Manufacturers Roundtable. The benchmarking report will help you determine:
- How your company’s compensation structure compares to other manufacturers
- Benefit offerings – Are yours competitive?
- How your financial metrics compare to regional manufacturers
Register for the Ohio or Kentucky seminar here.