Manufacturers Might Start Making Money Again by Year's End

The immediate future is looking at least a little bit brighter for small and mid-sized manufacturers, at least for those who participated in a recent survey conducted by Prime Advantage, a buying consortium for industrial manufacturers.

According to the survey, 80% of those polled in August 2009 expect revenues for the second half of 2009 to either stay the same or increase. This represents a marked increase from the group outlook (GO) survey conducted in January 2009, in which only 38% percent were predicting revenues to either stay the same as 2008 or increase.

Also, 31% of August respondents believe that capital spending will likely decrease from the first half of 2009, compared to the January survey when 66% indicated that capital spending would decrease from 2008 levels.

"The results of the latest Group Outlook Survey show that small and mid-sized industrial manufacturers, across many sectors, are seeing new orders materialize after many months of slow activity due to challenging financial and economic conditions, as they capitalize on new product development and new market penetration," says Louise O'Sullivan, president and founder of Prime Advantage. "With inventories lean, and reflective of demand, many manufacturers waited to replenish stock until as late as possible, but these results indicate that the recovery is starting to gain traction across a broad spectrum of our economy and that new orders are coming in."

However, a mere 12% say they've seen an increase in business this year stemming from the American Recovery and Reinvestment Act (ARRA), while only 33% expect to see an increase in 2010 or later from the ARRA program.

Raw material costs (such as metals and plastics) top the list of cost pressure concerns, as cited by 53%. That number, however, is down significantly from the previous two surveys, when 67% (January 2009) and 93% (July 2008) mentioned it as the top cost pressure concern.

The top external concern facing small and midsized manufacturers is customer demand (58%), followed by the state of credit markets and interest rates 21%) and the cost of non-fuel commodities (16%).

Inflation is a major concern for small and mid-sized manufacturers, as 90% have seen or expect to see rising prices on raw materials over the next six months. Another 57% share the same concern for energy costs, and 56% say the same about the cost of components.

On the jobs front, 82% believe their workforce will either stay the same or increase by the end of 2009.