Report finds manufacturers’ optimism continues to decline as potential economic recession looms 

With the risk of an economic recession on the horizon, manufacturers’ optimism is at an all-time low, according to a new industry report from Chicago-based Sikich. The latest “Sikich Industry Pulse: Manufacturing and Distribution” found that only 49% of manufacturers rated their optimism about business prospects over the next six months at a seven or higher on a scale of one to 10. This marks a consistent trend downward over the past year. In March 2022, three-quarters of manufacturers rated their optimism at a seven or higher, in line with 2021 ratings that hovered around 75% throughout the year. And in June 2022, 58% rated their optimism at a seven or higher.     

The manufacturers attributed their decline in optimism to several factors, with the looming economic recession being the most frequently named; 77% of survey respondents described it as a significant issue. Additionally, 62% of manufacturers named rising interest rates a contributor to their declined optimism, and 53% cited supply chain issues. Further, 46% of smaller manufacturers—companies with less than $50 million in revenue—described labor shortages as a challenge, though less than one-third of companies with more than $50 million in revenue cited labor shortage challenges.  

Manufacturers are considering a few different strategies to protect their companies from the recession. If needed, more than half (51%) would keep less inventory on hand, 39% would diversify their materials suppliers, and 34% may freeze hiring.    

And when it comes to automating, companies are focused on the factory floor. When asked which department in their company is currently implementing the most automation, 40% cited the factory floor. And, when asked which department manufacturers are planning to automate, an additional 22% named the factory floor. Further, two-thirds of respondents that currently implement the most automation on the factory floor are planning to pursue more automation moving forward.  

  “Automation will reap long-term benefits for the manufacturers that invest in these systems,” said Debbie Altham, senior director of enterprise technology at Sikich. “In addition to the factory floor, manufacturers should consider how automation can streamline back-office efforts, including finance, marketing, and human resources. These tools will allow manufacturers to overcome labor challenges, implement more efficient processes, and eliminate errors.” 

This latest report is based on an October 2022 survey of more than 120 executives from manufacturing and distribution companies across sectors including metal fabrication; industrial equipment; transportation; wholesale and distribution; food and beverage; and apparel, and footwear and textiles.