The latest results of The NAM/Industry Week Manufacturing Index show that manufacturers’ confidence improved in the first quarter of 2010 to the highest level in more than two years. There was also an uptick in expectations for sales, pricing power, employment and capital expenditures, signaling that the manufacturing recovery should gain steam over the coming year.
These are the major findings of the first quarter 2010 NAM/IndustryWeek Manufacturing Index, a quarterly survey of members of the National Association of Manufacturers (NAM) that launched in the fourth quarter of 1997. The latest results are based on the responses of 223 member companies of the Manufacturers’ association.
When the economy was entering recession in the fourth quarter of 2007, 70 percent of survey respondents had a positive business outlook. By the first quarter of 2009, the level of optimism had fallen to just 28 percent. Subsequently, the share of survey respondents with a positive business outlook began to improve. In the first quarter of 2010, the share of survey respondents with a positive business outlook had returned to a level of 70 percent — the highest level in nine quarters. (See chart below)
Other key findings of the 2010 first quarter survey include:
- Sales expectations for the next 12 months increased to 3 percent, nearly double the 1.6 percent rate anticipated during the two previous quarterly surveys.
- Employment expectations for the next 12 months increased to 0.4 percent, a significant improvement from a year earlier, when employment was expected to fall by 3.6 percent.
- Capital investment expenditure expectations for the next 12 months edged up 0.3 percent, marking a reversal from the decline in the fourth quarter when respondents’ investment expectations moved back into negative territory after increasing in the second quarter of last year.
The first quarter survey also included two timely questions on exports:
(1) Compared to domestic sales, how fast will respondents’ exports grow over the next year?
The results show that 71 percent of survey respondents export their products. Of those that export, about one third (34 percent) expect exports to grow slower than domestic sales over the coming year; more than one third (37 percent) expect export growth to rise as rapidly as domestic sales; and nearly one third (29 percent) expect exports to grow faster than domestic sales.
(2) For survey respondents that export, where will the largest dollar growth in exports take place over the next year?
Nearly half (46 percent) expect the largest dollar growth in exports to be to our country’s NAFTA partners (Canada and Mexico) followed by the countries in Asia/Oceana (26 percent), European Union (19 percent), Latin America (6 percent) and the Middle East (4 percent).
While these survey results are encouraging, it’s important to note that fully 30 percent of respondents do not share this positive business outlook and are struggling to find a footing in the recovery.
Full results of the First Quarter NAM/IndustryWeek Manufacturing Index are online at http://www.industryweek.com/EconInsight/.