Manufacturers Expecting Continued Growth

The level of optimism among manufacturing executives about financial prospects has increased from a year ago, according to Prime Advantage’s recent survey of chief financial officers. The report, which includes the top financial projections and concerns of member companies, revealed widespread expectations of growth in 2013, with 96 percent believing U.S. manufacturing will expand or stay the same this year.

When asked to cite the top potential threats to economic growth in the United States, executives named healthcare reform, the U.S. budget deficit and European fiscal conditions as the biggest hurdles to the growth and stability of the U.S. economy.

To address current economic conditions, U.S. manufacturers would support simplification of the business tax (91 percent), balancing the U.S. budget (78 percent) and reducing regulations (72 percent) as the most desired government actions.

As companies actively explore new markets, they are also increasing investment in research and development. Fifty percent of Prime Advantage’s member companies are planning to increase their spending for new product development, the highest percentage since 2009.

Cutting operational costs and developing new products and services, which were the top priorities of 2012, retained their positions for 2013. However, long-term strategic planning was replaced by seeking new markets for products and services, which moved 29 points up to the third position from the seventh position it occupied in 2012.

More companies than a year ago are planning to increase the number of domestic employees in 2013, as indicated by 49 percent of respondents (up from 41 percent in 2012). Three in four companies are planning to increase wages and salaries this year. This is in contrast to 2011, when 72 percent of companies expected to add employees.

Yet, companies are still struggling to find skilled labor. Seventy percent of respondents indicated that the low level of skilled employees in the area is the main reason for difficulties in filling positions. Sixty percent of companies that were actively hiring indicated they had open positions for which they were having difficulty finding qualified labor.

Nearly half of U.S. manufacturers (46 percent) indicated they engaged with local educational providers in order to train workers (up from 19 percent in 2012). Other short-term solutions to these challenges are setting up training for new employees (63 percent) as well as retraining existing employees (58 percent). As a long-term solution, companies indicated working with local economic development and government leaders, increasing funding for vocational education options, getting more involved with the K-12 program, and developing better training programs in manufacturing and technical areas.

External concerns facing U.S. manufacturers for the most part remained the same. One in three companies named customer demand as the top external concern, while two in three companies included it in their top three concerns. Price pressure from competitors was the second leading concern, selected by 61 percent of manufacturers. The cost of non-fuel commodities, a long-time third concern, was replaced by the federal government agenda, selected by 36 percent of manufacturers (up from 21 percent in 2012).

The ability to maintain margins, the chief internal concern of 2012 and 2010, retained its top position again, selected by 71 percent of respondents. The cost of healthcare, the leading concern of 2011, has moved up to second place, as 55 percent of respondents have included it in their top three concerns, up from 38 percent a year ago.

"We're very encouraged to see our members’ optimism regarding business for 2013," said Louise O'Sullivan, president and CEO of Prime Advantage. "To see continued growth in revenue, capital expenditures and hiring expectations, following a record-setting 2012 for many, is a true indication of a solid manufacturing economy."     

The Prime Advantage CFO survey was conducted in March and April of 2013. It included a cross section of financial executives from member companies consisting of industrial manufacturing firms representing more than 25 different industries with annual revenues ranging between $10 million and $4 billion. 

 For more information, visit www.primeadvantage.com.