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  July 26th, 2017 | Written by

US Manufacturers Still Optimistic Halfway Through 2017

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  • NAM: “The manufacturing sector has begun to turn a corner in recent months.”
  • US manufacturers are optimistic because tax reform, infrastructure, and regulatory relief might come to fruition.
  • Manufacturers grapple with political uncertainty; 28.9 percent unsure US is headed in the right direction.

“The manufacturing sector has begun to turn a corner in recent months, trending in the right direction both in the United States and globally after struggling for much of the past two years.”

That’s the conclusion of the Manufacturers’ Outlook Survey released by the National Association of Manufacturers (NAM) a few days ago.

President Donald Trump delighted in the news on Twitter.

The reason for manufacturers’ optimism, according to the NAM report is “that pro-growth policies… including tax reform, a major infrastructure package, and regulatory relief…might finally come to fruition…”

In March, NAM’s Manufacturers’ Outlook Survey rose to an all-time high in the survey’s 20-year history, with 93.3 percent of respondents positive about their own company’s outlook. Three months later, manufacturers remain upbeat, although not to the same extent, with 89.5 percent somewhat or very positive about their company’s outlook.

One explanation for the pullback is that the expected pro-business agenda is not proceeding with great speed through government channels. Still, the percentage of positive manufacturers averaged 91.4 percent over the first half of 2017, the highest consecutive two-quarter average in the survey’s history.

On the other hand, many manufacturers appear to be grappling with political uncertainties, as 28.9 percent said that they were “unsure” whether the United States was headed in the right direction.

Recent improvements in sentiment have corresponded with stronger manufacturing activity. Survey respondents predicted full-time employment will grow by 2.7 percent over the next 12 months, the fastest pace in the survey’s history, and up from 2.3 percent in the prior survey. Nearly 59 percent of manufacturers anticipate an increase in employment over the next year for their company, and 25 percent predicted a jump of at least five percent.

They also forecast 3.2 percent growth in capital spending over the next 12 months, a six-year high, and up from 2.1 percent in March. The percentage of respondents expecting capital expenditures to rise by at least five percent jumped from 25.5 percent three months ago to 35.9 percent now. “Such a large jump in investment plans represents a healthy dose of confidence in the overall outlook,” the report noted.

But larger firms were more enthusiastic about capital spending plans than their smaller counterparts. Manufacturers with 500 or more employees expected to increase their capital spending by 3.6 percent on average over the next 12 months, while smaller businesses, those with less than 50 employees, expected suggested 2.6 percent growth.

Respondents predicted sales growth of 4.8 percent over the next 12 months, a significant pickup from a year ago, when manufacturers forecast 1.6 percent growth. Export expectations also moved in the right direction, notable given the strong US dollar, with 1.1 percent growth expected over the next 12 months. One-third expect exports to increase over the next year, while 60.7 percent forecast exports to be flat.

Rising health insurance cost were once again cited as a major concern, with businesses seeing those costs increasing 8.4 percent over the next year. Respondents also listed attracting and retaining a quality workforce as a top worry, with 64.4 percent noting it as a primary challenge.