Today the results of the 3rd Quarter NAM/IndustryWeek Survey of Manufacturers were released and the top concern for manufacturers was uncertainty related to the political climate, cited by 78.7 percent of respondents. This was followed by rising healthcare costs (69.4 percent), an unfavorable tax and regulatory environment (62.4 percent), and slowing sales and a weak domestic economy (60.7 percent).
Many of those taking the survey were quick to discuss their frustrations with the political process, with many of them saying that decisions were on hold until after the election. The fiscal abyss – including both tax increases and budget cuts – was clearly on their minds, as they worry that it will send the economy downward.
Manufacturers were also less optimistic in their current outlook. The third quarter survey showed that 69.2 percent of NAM members responding to this survey had a positive outlook. This is down from 88.7 percent in the spring and 83.1 percent just three months ago. The difference can be explained by individuals shifting from “somewhat positive” to “somewhat negative.” In fact, the percentage of respondents who were “somewhat negative” nearly doubled from 15.8 percent in June to 29.6 percent today.
With that said, the lower business outlook level is consistent with reduced growth in industrial output over the next six months. Using regression analysis, the data from the NAM/IndustryWeek survey – along with other explanatory variables – suggests that industrial production could decline 1.2 percent between now and the first quarter of 2013. This model has explained 90 percent of the variation in the past. Having said that, time will tell whether this is an anomaly or whether this is foreshadowing a real decline. At a minimum, it indicates that manufacturers are very worried about the future direction of the economy.
In a press release issues in association with this survey, I make the following statement:
“Manufacturers are sending a clear message that Washington’s action or inaction can have a serious effect on our economy,” said NAM Chief Economist Chad Moutray. “The Congressional Budget Office has already warned that falling into the fiscal abyss will mean a recession next year, and manufacturers are not optimistic that Washington will be able to set us back on track in time. Unless Washington takes bold action to address the economic and political uncertainty and puts in place a pro-growth business climate, we can expect to see more dismal economic growth and pessimism from manufacturers.”
Chad Moutray is chief economist, National Association of Manufacturers.