The latest NAM/IndustryWeek Survey of Manufacturers found that activity picked up somewhat in the third quarter. The percentage of respondents who were either somewhat or very positive about their company’s outlook rose from 72.3 percent in June to 76.1 percent in September. While this does suggest improvement over the course of this year – particularly from December’s survey when businesses were worried about the fiscal cliff – it also indicates that growth remains less-than-robust, especially when compared to the beginning of 2012.
For the most part, the results of this survey mirror other economic data released recently, which note progress in activity in the summer relative to some weaknesses in the spring months.
Respondents said that they expect sales to rise 3.3 percent on average over the next 12 months, up from 2.7 percent last time, suggesting modest growth moving forward. Larger manufacturers were more positive than small and medium-sized firms about future growth in orders. Still, even with the increase, sales growth remains below the 4.7 percent average observed in the March 2012 survey.
Other measures of activity were also slightly higher for the quarter. Those taking the survey anticipate export sales to rise 1.4 percent (up from 1.2 percent), capital investment spending to grow 2.1 percent (up from 1.2 percent), and full-time employment to increase 1.1 percent (up from 0.6 percent). Hiring intentions overall remain sluggish, with just over 30 percent planning to add workers in the next year and roughly 60 percent expecting no changes in employment. Wages and salaries are predicted to increase 1.7 percent on average in the next 12 months, up from 1.6 percent last time.
Manufacturers continue to be concerned about rising health insurance costs. About three-quarters of respondents cited health costs as their primary business challenge, topping the list of current concerns for the third straight quarter. With continuing uncertainties related to implementation of the Affordable Care Act, many were still unaware of their premium costs for next year, and as was noted in the previous write-up, there continues to be a perception that these costs will rise significantly.
Business leaders are also anxious about the long-term health of the nation, and once again, they seek a long-term solution to the country’s fiscal woes. Nearly 85 percent of manufacturers completing the survey said that policymakers need to find a long-term solution to our deficit and debt challenges. As part of this, slowing the growth of entitlements (74.5 percent) and passing comprehensive tax reform (66.2 percent) were also listed as polices that the President and Congress should seek in the next 12 to 18 months.
When we speak with manufacturers, an increasing number of them note worries about monetary policies, as well. The Federal Reserve currently has over $3.6 trillion in assets, and it is purchasing $85 billion each month in long-term and mortgage-backed securities. (It is expected to slow, or “taper” those purchases perhaps as soon as the next Federal Open Market Committee Meeting on September 17-18.)
Perhaps surprisingly – especially given the anecdotal comments of many of our members on the topic – only one-third of those answering the survey ranked ending expansionary monetary policies as a top policy priority. Moreover, on a scale of 1 to 10 (where 1 is not worried at all and 10 is extremely worried), our members averaged a 6 when asked about how worried they were about the Fed’s exit strategy. This suggests at least a moderate degree of concern, with 57.2 rating it between 5 and 8, but perhaps not as high as some might have thought. Read the NAM’s press release on the survey here.
Chad Moutray is the chief economist, National Association of Manufacturers.