There is a growing sense that manufacturing activity is accelerating in the second half of 2013. The August Institute for Supply Management’s Purchasing Managers’ Index showed strong growth in new orders and production for the month, building on healthy numbers for July. The latest National Association of Manufacturers (NAM)/IndustryWeek Survey of Manufacturers is largely consistent with this pickup—a welcome change given the frustratingly slow pace over much of the past year. Yet, even with the improvements, demand and production growth has been mostly modest at best, with increases in hiring still lagging behind. Manufacturing production has risen just 1.3% year-over-year, and the sector has added just 20,000 net new workers during the past 12 months. 

The NAM/IndustryWeek Survey of Manufacturers has closely tracked these trends. After declining to 51.8% at the end of 2012, the percentage of respondents saying that they were positive about their business outlook rose to 70.1% in March and 72.3% in June. In this latest survey, that percentage edged slightly higher to 76.1%. Yet, the average in the first three quarters of 2013 (72.8%) was well below the average in the same time period last year (80.3%).

At the same time, manufacturing leaders are concerned about a number of possible challenges on the policy front, many of which will culminate this fall. First and foremost, almost two-thirds of respondents said it is extremely important for their business that the President and Congress make progress on funding the governmentfor the next fiscal year and in extending the nation’s debt ceiling. Part of this conversation could involve ways to avert the across-the-board federal budget cuts (sequestration). In a special question on this topic, roughly 85% of manufacturers said that finding a long-term federal budget deal that tackles the deficit and debt was the top challenge they want to see policymakers address, with reducing the regulatory burden on manufacturers and other businesses (79.1%, controlling rising health care costs (74.5%), slowing the growth of entitlement spending (74.5%) and passing comprehensive tax reform (66.2%) also top priorities.

Moreover, more than 90% of respondents said that addressing the nation’s fiscal challenges was either moderately or very important for their company. Roughly 80% felt that comprehensive tax reform was important for their firm. This was true even though the wording of the question made it clear that comprehensive tax reform—in which marginal tax rates might be lowered and the income tax base broadened—might result in some businesses seeing their tax burden increase, even in a “revenue-neutral” plan.

See also:

Manufacturers Sound Off on Fiscal Challenges

By the Numbers: NAM/IndustryWeek 2013 Q3 Survey Responses

We regularly ask about manufacturers’ primary business challenges. For the third quarter in a row, the top challenge was rising health care and insurance costs, cited this time by 74.6% of respondents. Many respondents noted uncertainties in the implementation of the Affordable Care Act as a major concern. Many are still unaware of their premium costs for next year, and as we noted in the last survey’s report, there is a perception that these costs will rise significantly, particularly at the small and medium-sized level.