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Article | Manufacturing

Manufacturing Growth Slows in October; Growth Expected Through 2025

Recent reports from the Institute for Supply Management (ISM), the Manufacturing Advocacy and Growth Network (MAGNET) and Team NEO indicate that economic activity in the nation’s manufacturing sector growth slowed somewhat in October 2021 but the manufacturing sector in Northeastern Ohio should continue to grow through 2025. The ISM report showed that its index of national factory activity for the month of October slipped slightly from the September index, but still indicates expansion in the manufacturing sector, which accounts for 12% of the U.S. economy. This is despite unprecedented obstacles to meet increasing demand, supply chain challenges, rising commodities prices and difficulties in transporting goods. Additionally, many pandemic-related issues such as employee absenteeism, inability to fill open positions and shutdowns due to worker illness and government restrictions continue to stifle manufacturing sector growth. The ISM report’s measure of supplier deliveries showed slower deliveries increased in October from September, meaning higher inflation for goods persisted. Notwithstanding these challenges, the manufacturing sector has been able to achieve seventeen consecutive months of growth.

Employment in the manufacturing sector is approximately 10% below pre-pandemic levels in Northeastern Ohio, according to the report from MAGNET and Team NEO, titled “Team NEO Quarterly Economic Review.” This trend is likely to continue through 2025. This is due, in part, to the struggles to fill open positions. However, another reason is that many manufacturing companies have adopted advanced manufacturing methods and equipment which utilize automation and technology, allowing them to increase production with less employees. The report goes on to state that manufacturing GDP is projected to increase by 8% through 2025, behind the expected national growth rate of 16%. Similarly, the national employment rate is expected to be below the pre-pandemic numbers by only 5%, compared to the 10% in Northeastern Ohio.

Both of these reports lend some degree of optimism to manufacturing in the near term. Challenges will continue to arise and companies must continue to confront them and initiate ways to overcome them. The team at HBK Manufacturing Solutions is tracking these challenges and is available to provide advice and counsel to your company to help you conquer them. Please contact us at manufacturing@hbkcpa.com.

About the Author(s)

Jim is a Principal of HBK CPAs & Consultants and the National Director of HBK Manufacturing Solutions, a group of specialists focused on manufacturing clients and their unique needs.

After joining the firm in 1988, Jim has spent his career working in a variety of industries, including manufacturing and distribution. As the National Director of HBK Manufacturing Solutions, Jim advises manufacturing clients on issues including tax planning, finance, succession planning, mergers and acquisitions, and ESOP transitions. In addition, he shares his knowledge and experiences with manufacturing specialists throughout the firm as well as local and regional organizations and trade associations focused on the manufacturing industry. To recognize his accomplishments, Jim was named Business Professional of the Year in August 2019 by the Youngstown Warren Regional Chamber of Commerce.

In addition to his HBK role, Jim is Chairman of the Board of the Youngstown Business Incubator, an internationally recognized incubator focused on programs including the use of additive manufacturing and advanced manufacturing technologies in the Mahoning Valley and Northeast Ohio.

Jim’s accomplishments include:

  • Evaluating and implementing strategies including the LIFO (last-in, first-out) inventory accounting method, cash basis accounting method, research & development tax credits, Interest Charge Domestic International Sales Corporations (IC-DISC), and cost segregation studies with manufacturing clients in a variety of sub-industries.
  • Supporting clients with cash flow projections and financial statement projections, including companies with annual revenues in excess of $100 million dollars.
  • Assisting a company in securing an asset-based line of credit with a financial institution for $30 million dollars.
  • Helping companies analyze state income and sales tax filings requirements in order to minimize liability and maximize compliance.
  • Aiding a manufacturing client in obtaining state tax credits based on their investment in expanding their manufacturing capabilities.
  • Representing clients before the Internal Revenue Service and state and local taxing authorities.
  • Developing a training program for the HBK Manufacturing Solutions team, to improve internal capabilities and overall manufacturing expertise.
    • Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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