The global economy has slowed significantly over the past few months. Manufacturers remain anxious about the upcoming fiscal abyss, with the prospects of tax increases and budget cuts potentially sending the economy into a downturn going into 2013.

Meanwhile, with Europe in a recession and economic growth lagging around the world, the demand for manufactured goods has lessened.  For manufacturers, these and other headwinds have reduced manufacturing activity to a near standstill, with the Institute for Supply Management’s Purchasing Managers' Index indicating a contraction for three consecutive months.

The most recent NAM/IndustryWeek Survey of Manufacturers reflected the changing dynamic of the year so far—a dramatic shift in which manufacturers reflect their concerns with the uncertainty facing them.

In the first quarter, manufacturing activity was strong, helping to drive the overall economy with both outsized output and employment contributions. At the time, nearly 89% of manufacturers were either somewhat or very positive about their company’s outlook (Figure 1).

This fell to 83% in the second quarter, and now, it is down to 69%. The shifting sentiment was increased uncertainty about the economic climate. In fact, the percentage of respondents who were “somewhat negative” nearly doubled from 15.8% in June’s survey to 29.6% in the current one.

Figure 1: Manufacturing Business Outlook, 2000-2012

Note: Percentage of respondents who characterized the current business outlook as somewhat or very positive. Percentages are annual averages.