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Though respondents to the National Association of Manufacturers’ (NAM) third quarter 2023 survey reported outlooks less favorable than in the previous quarter’s study, their insights highlight several industry strengths and forecasts to watch as 2023 comes to a close. Business owners in manufacturing facilities of all sizes expressed less concern than previously about the likelihood of a recession, and notably, said they expect increases in sales and production in 2024.
In NAM’s 24-question poll, more than 300 respondents contributed to the data accumulated for survey insights. Overall, they demonstrated less enthusiasm about future business than they expressed in the previous quarter’s survey; however, their expectations still exceeded the uncertainty of pandemic levels. Much of their concern appeared to be a side effect of general economic challenges, such as inflation and workforce shortages. Nonetheless, consumer spending has remained resilient throughout recent quarters. With inflation gradually improving in many sectors apart from food prices and energy, a recession appears more distant to many manufacturers.
The upcoming 2024 presidential election also has the attention of most respondents, as many fiscal and production decisions hang in the balance due to potential regulatory changes. Many manufacturers categorized the current business climate as “unfavorable,” with regulatory burdens influencing their decisions to delay capital spending and/or increases in compensation levels. Relatedly, most manufacturers expressed a desire to reduce these same regulatory burdens to hasten the approval process for new projects.
On an optimistic note, respondents reported that many supply chain challenges from the prior year have begun to subside, evidenced in the fact that most who took the survey anticipate shrinking inventories in the coming year. With less supply chain uncertainty, manufacturers say they are continuing to reduce existing stock and instead are buying to meet demand as it surfaces.
Respondents projected sales and production increases of roughly 2 percent for the coming year, which, the survey indicated, would likely be channeled to new capital purchases and further attempts to increase their workforces. The greatest production challenge in recent quarters, employers’ ability to attract and retain competent works, remains strained. However, quit rates have declined from the prior year and unemployment remains at a low, around 3.5 percent. Creative hiring processes and retention strategies, such as employee benefit plans, continue to be seen as keys to healthy production levels.
Overall, the Q3 2023 survey highlighted many key issues for manufacturers to keep their eyes on going into 2024. Regulatory changes, cost inflation, and the workforce pool remain front and center concerns as healthy production levels continue.
To read the Q3 2023 NAM Outlook survey, visit https://www.nam.org/2023-third-quarter-manufacturers-outlook-survey/. To discuss issues specific to your manufacturing company, contact a member of HBK Manufacturing Solutions at 330-758-8613 or manufacturing@hbkcpa.com.
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