Manufacturing Optimism Rose to Another All-Time High in the Latest NAM Outlook Survey

The latest NAM Manufacturers’ Outlook Survey reflected continued optimism in the sector, with the headline index rising to unprecedented heights. Indeed, 94.6 percent of respondents said they are positive about their own company’s outlook, the highest in the survey’s 20-year history.

Optimism has been at historically high levels throughout the year, averaging 91.8 percent in the four quarters of 2017, up from a 64.3 percent average in 2016. Manufacturers have reported a robust turnaround in activity over the past 12 months, and they are very upbeat in their assessment of demand and output moving forward. NAM President and CEO Jay Timmons appeared on CNBC to highlight these results.

Both sales and capital spending are anticipated to increase over the next 12 months at the fastest rates since mid-2011, and employment continues to trend strongly upward. Respondents predict sales growth of 5.2 percent over the next year, up from 4.5 percent in the previous release, with more than 56 percent saying their sales will rise by at least 5.0 percent over the next 12 months. At the same time, capital investments are anticipated to grow 3.4 percent over the next 12 months, up from 2.7 percent in September, reflecting business leaders’ increased confidence in the future.

In addition, the data indicate continued strength in the labor market. Full-time employment is expected to rise 2.6 percent over the next year, up from 2.2 percent in the previous survey. This is just shy of the 2.7 percent pace recorded in June, which was the fastest rate in the survey’s history. Nearly 62 percent of manufacturers anticipate an increase in employment over the next year, with 22.8 percent predicting a jump of at least 5 percent. Along those lines, the inability to attract and retain a quality workforce topped the list of primary business challenges, with 72.9 percent of respondents citing this as their biggest concern. This was closely followed by rising health care and insurance costs at 72.3 percent.

Manufacturers are optimistic about the chance that long-sought-after comprehensive business tax reform will be enacted into law. Just more than three-quarters of respondents said they supported the current tax proposals being debated in Congress, with 16.4 percent unsure.

In general, the survey results and comments indicate that a simpler, modern tax code would help manufacturers be more competitive in the global marketplace. Nearly 63 percent said comprehensive business tax reform would encourage their company to increase capital spending and more than half would expand their business (57.9 percent) and hire more workers (53.8 percent), while a significant proportion would increase employee wages and benefits (48.8 percent) and invest more in the community (34.7 percent).

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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