Key Takeaways from the National Association of Manufacturers Q1 2024 Outlook Survey

With the first quarter of 2024 behind us, many American manufacturers reflected on the challenges of 2023 and await the remainder of 2024 with positive outlooks. In the National Association of Manufacturers’ (NAM) survey of 300 respondents, regulatory burdens, staffing struggles, and increasing healthcare costs were at the forefront of the industry’s challenges. However, there were indications of growth in sales and production, as well as employee retention, that contributed to optimism for the year ahead.

According to NAM’s survey respondents in February, American manufacturers anticipate 2.2% growth in sales over the coming 12 months. This is coupled with anticipated production hikes of an average of 2.3%. However, on a drearier note, survey respondents also expect that the costs of raw materials and other inputs will rival this growth with an increase of 2.4%. Inflation and employee retention costs remain large drivers of this cost trend.

Notably, one of the fastest-growing threats to production in the industry thus far in 2024 is reportedly rapid growth in federal regulation. Over 2023 and 2024, manufacturers witnessed the rollout of numerous new compliance requirements mainly issued by the Environmental Protection Agency (EPA). These spanned many areas of production including emissions and chemical processing. Respondents maintained that these regulations would burden their industry, as they require significant time to understand and comply, with regulations being costly to implement and potentially detrimental to the efficiency of daily manufacturing operations.

Another key area of concern in the first quarter was rising health insurance costs. As much as a 7.1% increase is expected over the next 12 months for such benefits; this already follows increases that took effect in 2023. NAM respondents cited supply chain middlemen such as “pharmacy benefit managers” as key contributors to rising costs for their companies.

Lastly, recent federal tax policy saw lessened monetary incentivization for research and development (R&D) and capital investments. Beginning on January 1, 2022, R&D costs must be amortized over time rather than fully expensed in the current tax year.  Many manufacturers expressed that this has, and will continue to, cause them to scale back on hiring now that fewer funds are available to incentivize this activity.

However, in spite of the challenges that respondents faced in recent months, most still expressed positive sentiments for 2024. With employment, the industry’s main concern in recent surveys, companies have finally seen some progress. Full-time employment in the manufacturing sector is expected to rise 1.0% over the next twelve months, a step that many employers tied back to their efforts to increase wages and benefits (predicted to grow 2.8% in the coming year).

With sales on the rise, more demand, and minor improvements in retention, NAM respondents face the remainder of 2024 with optimism.

To read the Q1 2024 NAM Outlook survey, click here.

To discuss issues specific to your manufacturing company, contact a member of HBK Manufacturing Solutions at 330-758-8613 or manufacturing@hbkcpa.com.