Manufacturing Survey: Uncertainty Over Government Policy Holding Back Growth

The NAM/IndustryWeek Survey of Manufacturers for the third quarter of 2013 shows that concerns over rising health care costs, our nation’s long-term fiscal challenges and increasing regulatory burdens continue to hold back robust growth for manufacturers.

Small, medium and large manufacturers all noted the uncertainties surrounding implementation of the Affordable Care Act as a top concern, and many are still unaware of their premium costs for next year. Fixing the long-term federal debt ranks as the top policy fix manufacturers would like to see from Washington.

“Manufacturing leaders continue to worry about the long-term challenges confronting the nation, particularly on fiscal and monetary matters,” commented NAM Chief Economist Chad Moutray. “These uncertainties, combined with Washington’s current regulatory agenda, continue to hold back robust growth in the sector.”

Key survey findings include the following:

  • Manufacturers are cautiously optimistic that growth will continue this year amid an uptick in sales and production in recent months. However, growth and hiring continue to be modest at best, with only 20,000 additional manufacturing jobs added over the past 12 months.
  • Nearly 75 percent of manufacturers identified rising health care and insurance costs as their most important challenge. There is a strong perception that these costs will rise significantly, particularly at the small and medium-sized level.
  • Nearly 85 percent of manufacturers identified finding a long-term federal budget deal that tackles the debt as the top policy they would like to see from Washington.
  • As the Federal Reserve begins to debate “tapering” its asset purchases, perhaps as soon as its September meeting, the survey asked manufacturers how concerned they were regarding the Federal Reserve’s “exit strategy.” On a scale from 1 to 10, with 10 being “extremely worried,” responses averaged a 6. This suggests at least a moderate degree of concern, but perhaps not as much as anecdotal evidence might have suggested.

“The survey found that business activity picked up moderately in the third quarter,” noted Moutray. “The percentage of manufacturers 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 suggests improvement across the year—particularly from the December NAM/IndustryWeek Survey of Manufacturers when businesses were worried about the fiscal cliff—it also indicates that growth remains less than robust, especially compared to the beginning of 2012. For the most part, our survey results mirror other recent economic data that note progress in business activity in the summer relative to some weaknesses during the spring.”

An NAM model suggests that manufacturing production could increase 3.5 percent at the annual rate over the next two quarters, which would indicate a pickup in activity from the current pace.

The NAM/IndustryWeek Survey of Manufacturers was conducted among the NAM’s membership of small, medium and large manufacturers, including more than 25 Council of Industry members. Read news coverage in The Hill, Reuters, Bloomberg, The New York Times and the American City Business Journals. Click here for our Shopfloor blog post.