As is often the case, firm size heavily influences these findings. Smaller manufacturers (e.g., those with fewer than 50 employees) were less positive than their medium-sized (50 to 499 employees) or larger (500 or more employees) counterparts. In fact, 57% of small manufacturers said that they were negative in their outlook, compared to 44% of medium-sized businesses and 47% of large businesses. Slower sales growth was largely the main factor, with small firms expecting their sales to increase just 0.5% over the next 12 months. Larger manufacturers forecast the largest increase in sales, up 1.6% for the next year. As a result, small and medium-sized manufacturers were negative in their intentions for capital spending, whereas larger firms were positive. Manufacturers of all sizes had lower hiring plans at essentially the same rate.

Figure 6: Special Question – What Are the Most Pressing Priorities for the Obama Administration and the 113th Congress?
Note: Respondents were able to check all that apply. Therefore, responses exceed 100 percent.

The top challenge for manufacturers—cited by 84.2% of respondents—was uncertainty related to the political climate. With potential tax increases and budget cuts looming at the beginning of 2013, businesses are following the political stalemate in Washington closely, as they were before the election. This was the top concern in September’s survey as well, when it had 78.7% of the responses. Many of the comments that were offered also centered on the fiscal cliff and possible sequestration in the discretionary budget. A sampling of these comments appears later on.

In a series of special questions, we were interested in learning more about manufacturers’ reactions to the election and their policy priorities for the coming year. One thing was certain: businesses are highly skeptical that Washington will be able to address the nation’s long-term fiscal challenges, with almost three-fourths of respondents saying that the election made them less optimistic for such a deal. Moreover, only 7.5% of manufacturers anticipate that the President and Congress will enact a “grand compromise” during the lame-duck session that will avert the fiscal cliff, with roughly 28 percent feeling that the fiscal cliff will not be averted. Another 48 percent feel that the cliff would be averted by delaying the tax increases and budget cuts by a few months to a year, and almost 16% were uncertain as to whether or not the fiscal cliff would be averted or not.

Figure 7: Primary Drivers of Future Growth, Fourth Quarter, 2012
Note: Respondents were able to check all that apply. Therefore, responses exceed 100 percent.

It should be no surprise that manufacturers’ optimism has declined, or that so many have downgraded their forecasts for 2013. Nearly 63% of respondents said that they have reduced their business outlook for next year as a result of uncertainties surrounding the fiscal cliff . Even more worrisome, 42.6% have either reduced or slowed down their business investment, and 36.2% have either reduced their employment or stopped hiring. These impacts were even larger for small manufacturers with fewer than 50 employees, where two-thirds have reduced their outlook, and 45% and 42% have reduced their investments and hiring, respectively.

We also asked manufacturers about their most pressing priorities for the second Obama term and the upcoming 113th Congress. Budgetary issues dominated the list, as might be expected. Almost 89% wanted the top priority to be a long-term budget deal that tackles the deficit and debt . Slowing the growth of entitlements (82.1%) and averting the fiscal cliff (75.5%) were also high on the list. At the same time, manufacturers want to ensure that the overall business climate is strong and competitive globally. You can see this with the desire for reducing the regulatory burden (76.4%), passing comprehensive tax reform (68.7%), controlling rising health care costs (67.6%) , implementing a true “all-of-the-above” energy policy (48.8%), addressing the “skills gap” (30.4%) and expanding trade agreements (22%).

Of course, each of these items is important for manufacturers, with some being more dominant than others. For instance, while having more trade agreements ranks last in this ordinal ranking, it would be hard to say that it is not vital for the sector. In fact, nearly 41% of our respondents said that increased international sales were crucial for future growth. As mentioned earlier, those manufacturers who were more positive about increased export sales tended to be more optimistic in their overall outlook. Also, the issue of attracting and retaining a quality workforce has become an almost universal mantra for manufacturers and businesses of late. In a recent survey of small and medium-sized manufacturers, more than 63% said that they were having difficulty filling their open positions.

The NAM/IndustryWeek Survey of Manufacturers has been conducted quarterly since 1997. This survey was conducted among NAM membership between November 16 and 31, 2012, with 442 manufacturers responding. Responses were from all parts of the country, in a wide variety of manufacturing sectors and in varying size classifications. Aggregated survey responses appear on the following pages. The next survey is expected to be released in March 2013.