Conversations with manufacturing leaders about the coming decade tend to be rather “bullish.” The manufacturing sector has been a bright spot in the economy since the recession, providing outsized contributions to both output and employment. And there is a sense that the sector is poised for continued expansion over the coming years, thanks largely to America’s newfound energy abundance and the increased competitiveness of the sector globally.
This quarter’s National Association of Manufacturers (NAM)/IndustryWeek Survey of Manufacturers reflect this, as we have seen the highest expected sales (up 4.1%) and capital investment (up 2.3%) figures in two years. Along those lines, manufacturers also see an improving economy (75.1%), new product development (57.3%) and increased efficiencies in the production process (48.6%) as the biggest drivers for future growth. In addition, over the next 12 months, nearly 40% of manufacturers expect their export sales to increase, with another 57.1% saying their international orders should stay the same.
However, manufacturers expressed a palpable sense of frustration both with the slowness of economic growth and with the political process. Washington’s burdensome regulatory, tax and health care policies still loom large in business decisions, particularly for the smallest manufacturers. While we have moved beyond the budget showdown of last fall, concerns continue to mount that Washington is not solving the country’s problems. In the most recent survey, 79.3% of respondents said that the country was on the “wrong track,” with just 5% suggesting that it was “headed in the right direction.” One individual from the machinery sector might have summarized these feelings appropriately with this comment:
We need less Democrats and less Republicans and more smart people that are willing to tackle the longer-term issues with compromise. Not as a bulldozer and not with BS, but something that all Americans can believe in and actually trust.
This year has started out a bit weaker than originally hoped. A number of severe winter storms wreaked havoc with demand and production in the early months, and exports continue to grow at a disappointingly slow rate. Indeed, in the first quarter, real GDP shrank for the first time in three years, and while we have seen a rebound in the spring months, overall activity levels remain below the more robust rates seen at the end of 2013. Already, we have seen forecasts for growth in 2014 downgraded from around 3% a few months ago to something closer to 2.5% today.