Persistent and strong demand help U.S. manufacturers remain doggedly optimistic for the future, despite growing concerns around inflation and the growing specter of another recession. That’s according to the National Association of Manufacturers’ latest outlook survey on its members, released last week.
According to the survey, 82.6% of all NAM respondents reported they were at least somewhat optimistic about their own company’s outlook, but a smaller majority—59.3%—said continued inflation would make a recession more likely in the coming 12 months. NAM used the results to update its Manufacturing Outlook Index to 55.0, down 4.2 points since its first-quarter survey in March.
Respondents surveyed at the end of May anticipated growth in sales, employment, production, employee wages and prices for their companies' own goods, but they also expected growth in raw material and health insurance prices.
Smaller manufacturers were, as in previous months, more circumspect than most about their company’s outlook: The 69 responses from companies with fewer than 50 employees were only 72.5% optimistic, down from 80.3% in the first quarter. Optimism also declined but remained high at medium and large companies. The percentage of positive responses from medium companies fell 5.7 percentage points to 85.5% and positive responses from large companies fell 3.0 points to 84.8%.
The top concerns for manufacturers, according to NAM, are the pressures of inflation and continued supply chain issues, both complicated by the war in Ukraine and ongoing COVID-19 restrictions in China.
“The war in Ukraine continues with no obvious end in sight, increasing pricing pressures and potentially tipping Europe into a downturn,” the report notes, adding that growth in China slowed by COVID-related closures has only exacerbated supply chain bottlenecks. Finding enough employees also remains a concern, as surveyed manufacturers predict that employment wage growth will continue at near-record paces even as expected full-time employment growth will cool somewhat.
In a statement accompanying the report, NAM President Jay Timmons prodded Congress to help manufacturers compete with China and refrain from increasing taxes on manufacturers.
“Through multiple crises, manufacturers have proven remarkably resilient, but there’s no mistaking there are darker clouds on the horizon,” Timmons said.