Manufacturers adjusting to post-recession "new normal"

September 20, 2012

Middle-market manufacturers and distributors are adjusting to the "new normal" of the post-recession era by focusing on efficiencies, operational improvements, and innovation, according to a newly released "McGladrey Manufacturing and Distribution Monitor" survey.

The survey, sponsored by Chicago-based assurance, tax, and consulting firm McGladrey LLP, shows that these companies are largely optimistic about their own businesses. It also indicates, however, that they are grappling with a variety of challenges, including eroding confidence in both domestic and global economic conditions, struggles with finding the talent they need to compete, and uncertainty around the looming expiration of the 2001 and 2003 tax cuts.

According to the survey, 83 percent of middle-market manufacturers and distributors are optimistic about conditions for their own businesses. However, the number of companies reporting that they are "thriving" is 39 percent, a 6 percent decrease since 2011, and that decline has been accompanied by deteriorating confidence in both the domestic and global business environment.

In 2012 less than half (46.7 percent) of the 924 respondents report having an optimistic outlook on the U.S. economy, down from 62 percent in the spring of 2011. Confidence in the world economy has plummeted as well, with only 16.9 percent of respondents reporting some optimism about the world economy, down from 50 percent in the spring.

Additional findings from the survey revealed that nearly three-quarters of all respondents (73.7 percent) reported that the expiration of the Bush-era income tax rates would do some harm to their business, with nearly half (48.3 percent) reporting that it would do moderate or major harm. Similar expectations were found when respondents were asked about the potential harm created by the expirations of capital gains tax rates (64.7 percent) and the bonus depreciation credit (69.3 percent).

Further analysis of responses shows that, given the current state of sluggish economic growth and uncertainty, manufacturers and distributors are both tackling the "new normal" by becoming leaner, more efficient businesses, focusing on making more long-term, structural changes to process and technology infrastructures that boost productivity while cutting costs.

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