The outlook for U.S. manufacturing cooled in the second quarter of 2019 amid growing trade and workforce concerns.

The National Association of Manufacturers' Outlook Survey; Second Quarter 2019 shows the sector continues to expand, although more slowly than in previous quarters.

Expected growth of U.S. manufacturing activity. Source: NAM Outlook Survey: Second Quarter 2019.

Eighty percent of manufacturers say they are optimistic about their own company's outlook, down from 90% of those surveyed in the first quarter of the year.

They expect sales to grow 3.4% over the next 12 months (down from 4.4% in March) and full time employment to increase 1.6% (against 2.1%).

More than two-thirds (69%) cite an inability to find skilled workers as their top challenge, while 56% nominated trade uncertainties.

"Clearly, optimism is still strong among manufacturers, but you can't overlook the fact that trade uncertainties are causing concern for manufacturers," NAM chief economist Chad Moutray said.

"I would expect these numbers to improve if we get the U.S.–Mexico–Canada Agreement across the finish line, strengthen our trading relationships by removing the threat of 232 auto tariffs, and get a trade deal with China done."

Worker Shortage

The industry's skilled worker shortage is a longstanding problem, one exacerbated by near-record low unemployment, with more job openings than job seekers.

Manufacturers could have 2.4 million unfilled jobs by 2028. NAM and The Manufacturing Institute launched a $10 million Creators Wantedcampaign, with a goal of filling 600,000 manufacturing jobs by 2025.

"Optimism is still strong among manufacturers, but you can't overlook the fact that trade uncertainties are causing concern."

NAM chief economist Chad Moutray

Eighty percent of those surveyed in the second quarter said congressional approval of the USMCA trade agreement was important to their company. Other findings:

  • 66% expect increased production over the next 12 months
  • Export growth rate expected to rise 0.4% over the next 12 months (down from 0.9% in March)
  • Raw material prices expected to increase 3.1% in the next year (3.3%)
  • 75% believe the nation's infrastructure is not positioned to drive economic growth over the next 10-15 years
  • 78% say immigration reform is one way of addressing the skilled worker shortage

Manufacturing Output

New data from the U.S. Bureau of Economic Analysis shows manufacturing output hit a record high in the first quarter of the year.

The July 15 BEA report shows manufacturers produced $2.3852 trillion worth of goods, up from a record $2.3845 trillion in the fourth quarter of last year.

"Manufacturing output has consistently set new records since the beginning of 2017, and while we have seen softer data so far in 2019 than we might prefer, I would continue to expect the sector to hit new all-time highs throughout the rest of this year," Moutray said.

Moutray said manufacturing continues to have the largest economic multiplier of any major sector, accounting for 11.3% of real GDP in the first quarter.

"Manufacturing in the United States is alive and kicking, producing more goods than ever and continuing to be a bright spot in the economy," he said.

Filed Under: Manufacturing

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