Health Care Tops the List of Concerns in the Latest NAM/IndustryWeek Survey

By June 10, 2013Economy, General

The latest NAM/IndustryWeek Survey of Manufacturers found that rising health insurance costs topped the list of concerns this quarter. The issue was cited by 82.2 percent of respondents, higher than the 74.0 percent level observed in the first quarter survey.

A series of special questions on the Affordable Care Acts drilled further on this topic. Specifically, 99.0 percent of manufacturers surveyed said that they provide health insurance coverage to their workforce, with 38.0 percent of those self-insuring. The average health insurance premium increased 8.6 percent this year, with a whopping 13.9 percent predicted for next year. More than anything, the 2014 numbers suggest just how much uncertainty is out there regarding insurance rates, with the perception out there that they will go up significantly. Just 43.8 percent of manufacturers said that they were prepared to implement the ACA when it goes into effect starting later this year.

Looking at the current economic outlook, 72.3 percent of manufacturers said that they are either somewhat or very positive about their company’s outlook, up from 51.8 percent six months ago and 70.1 percent three months ago. With the exception of the December survey, optimism levels have been roughly 70 percent since September. In essence, this survey confirms the good-but-not-great nature of the current manufacturing economy, much as we have seen in the most recent Institute for Supply Management and employment numbers. Sales are expected to rise 2.7 percent over the course of the next 12 months. While this was higher than the 2.3 percent observed last time, it was still lower than the 4.3 percent observed one year ago.

Manufacturers are currently planning to increase their hiring over the next 12 months by just 0.6 percent, a slight drop from the 0.7 percent rise noted in the last survey. Just over half of the respondents expect their employment levels to be the same, with nearly 16 percent intending to reduce their employment. Meanwhile, capital spending should grow by 1.2 percent over the next year, up from the 0.9 percent increase predicted in March.

On the international front, manufacturers have struggled lately to boost their exports, particularly with slowing economies worldwide. This goes beyond the European recession, which has deepened in recent reports. Respondents said that they expect exports to increase 1.2 percent over the next 12 months – a rate that has declined over the course of the past few surveys. As with past reports, those firms that expect increased exports over the next 12 months tend to be more positive than those that anticipate either no growth or declining export levels.

Larger firms were more positive than their small and medium-sized counterparts. The largest differences were found when you look at expected sales increases. Larger manufacturers have sales expectations of 3.2 percent over the course of the next 12 months, with 2.5 percent for small and 2.6 percent for medium-sized entities.

Looking ahead, the survey does offer some cautiously optimistic news for the second half of 2013. Using a model to predict output two quarters in advance, the data suggest that industrial production in the fourth quarter of 2013 will be 2.8 percent higher than its level in the fourth quarter of 2012. This would be 1.8 percent greater than the most recent industrial production numbers from April. (Note that new production data from the Federal Reserve will be released on Friday.) Improvements in the housing permits and the stock market were the largest contributors to the model’s rise in the next six months.

Chad Moutray is the chief economist, National Association of Manufacturers.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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