Survey reveals manufacturers' top economic concerns

October 3, 2011

Chicago-based Prime Advantage, a buying consortium for midsized manufacturers, has released the findings from its latest semiannual Group Outlook Survey, revealing the top financial concerns of small and midsized U.S. manufacturers for the second half of 2011. The findings reveal that most of these companies are counting on continued economic growth for U.S. manufacturing for the rest of 2011, holding on to the confidence that was displayed in the last semiannual projection done by Prime Advantage in February.

Highlights of this year's survey include these findings:

• Forty percent of the small and midsized manufacturing professionals who took the survey reported that their companies expect revenue increases in the last half of 2011.
• Nearly 25 percent of the manufacturing procurement officers that took the survey reported that their companies expect capital spending increases in the second half of 2011.
• Thirty-six percent said they were planning new hires in the second half of 2011.
• About 33 percent said that their business was negatively affected by the earthquake and tsunami that hit Japan in April.

Just 13 percent said they predicted revenues would fall in the last half of 2011, with anticipated slowdown in specific markets and overall customer demand listed as main reasons for the decline. This number shows improved confidence when compared to August 2010, when 18 percent anticipated revenues to decline.

Seventy-nine percent of those surveyed stated capital spending, such as purchases of property or equipment, would stay equal to February projections or increase over the last half of 2011. Twenty-one percent said they would decrease their spending as compared to the first half of 2011.

Eighty-eight percent of the respondents surveyed expect employment levels to match February projections or increase. Survey respondents also expect a slight increase in layoffs from the beginning of this year (11 percent over the last half of 2011, compared to just 3 percent predicted for the first half of 2011, and 6 percent in August 2010). This result is far from the levels of January 2010, when 20 percent of companies expected layoffs.

The top cost pressures that most concern midsized manufacturing companies over the next six months include the cost of raw materials (82 percent), followed by the cost of base materials for components (72 percent). Logistics and health care nearly tied as the third-highest cost pressure concern (43 percent and 40 percent, respectively).

When asked to rank supply chain focus points for the remainder of 2011, 81 percent said that cost containment and reduction was the top issue, followed by the need to reduce inventory levels (59 percent), managing and reducing supply chain risks (45 percent), and eliminating inefficient processes (44 percent).

Prime Advantage members are surveyed twice each year for their six-month projections on a variety of economic indicators. The August 2011 survey involved executives and purchasing professionals that represent durable goods manufacturing firms with annual revenues between $10 million and $1 billion; the majority are between $20 million and $500 million. The survey received a 14 percent response rate from 528 top professionals representing U.S.-based manufacturers in more than 25 different industries.