Middle-market manufacturing executives are optimistic about their companies' growth prospects, but see government regulation, health care reform, the federal deficit and other policy-related pressures as the greatest threats to their continued recovery.
That's the overarching theme of McGladrey LLP's "2013 Manufacturing and Distribution Monitor," a survey of more than 1,000 executives representing middle-market manufacturers and distributors.
Based on the survey results, manufacturers and distributors have high hopes for the next 12 months, with 85 percent of the executives expressing optimism about their firms' growth prospects.
Eight in 10 executives (83 percent) said they expect their U.S. sales to increase, while 63 percent said they expect their international sales to increase.
Meanwhile, nearly two-thirds of the survey respondents indicated that they expect to add jobs over the next year.
Still, the survey suggests that manufacturers and distributors are much less optimistic about external forces beyond their control.
At the same time, however, there are positive signs that a return to growth and improvement in the domestic economic outlook could boost hiring in the manufacturing sectors.
Among the survey's key findings:
- Manufacturers and distributors see regulatory and policy-related roadblocks—including health care reform, the federal deficit, tax changes and others—as the biggest threats to their future growth. Government regulation in general was the most commonly cited threat, with 74 percent of respondents indicating that they expect it to limit their growth over the next 12 months.
- The potential impacts of health care costs and Obamacare implementation are of particular concern to manufacturers and distributors. Health care reform was the second-most frequently cited threat to growth, with 71 percent of respondents indicating that they expected implementation of the Affordable Care Act to either limit or significantly limit growth over the next 12 months.
- More than half of respondents expect the skills gap to limit growth over the next year. Fifty-seven percent of respondents said they expect growth at their respective firms to be limited by a lack of skilled workers, demonstrating that the issue is more than just a theoretical problem and one that is having a significant impact on economic progress.
- The onshoring trend has not caught on in the middle market. Only 14 percent of respondents said they are considering bringing overseas operations back to the United States over the next 12 months. At the same time, however, the survey also suggests that the trend could accelerate among midsize manufacturers and distributors in the coming years, as 52 percent said they believe it is important to have operations in close proximity to their customers, most of which are in the U.S.
"The results from this year's monitor make clear that manufacturers and distributors are feeling better than last year about the things they can control, but they remain concerned about what is going on outside of the walls of their factories and offices," said Karen Kurek, national manufacturing and distribution practice leader for McGladrey.
"While this internal-versus-external dynamic is not new, the displacement of traditional concerns such as market conditions and materials pricing as top threats represents a major shift for the industry. While executives remain concerned about those issues, in this post-recession environment, they now see regulation and government policy as the greatest threats to future growth."
Among other findings, executives indicated that IT will be their biggest investment priority in the next 12 months, with 79 percent saying that they intend to increase spending on IT—more than any other category of investment.