Survey: U.S. Manufacturing Optimism Grows in Third Quarter
Optimism among national manufacturers nearly doubled from the second to third quarter, a new survey shows.
Two-thirds of manufacturers—66%—are optimistic about their company’s prospects in the third quarter, a dramatic increase over the one-third—33.9%—who were positive in the second quarter, according to the recent survey from the National Association of Manufacturers.
Change in Manufacturing Activity: Q3 vs Q2
Source: National Association of Manufacturers.
Optimism appears to have ticked up recently along with manufacturing activity.
The Federal Reserve reported that total industrial production rose 3% in July after a 5.7% increase in June, although still below its pre-pandemic level.
And the Institute for Supply Management reports that manufacturing expanded in August at its fastest pace since November 2018, thanks to the strongest growth in orders since January 2004.
“Though it will take a while for output and hiring in the sector to recover to pre-recessionary levels, the survey indicates that production is on the rise,” the NAM report said.
The optimism among manufacturers grows from smallest to larger companies with 62% of small manufacturers expressing optimism, 65.5% of midsize companies, and 70.3% of large manufacturers.
However, respondents expect the growth rate for full-time employment and capital investments to fall over the next 12 months, the survey shows.
How successful your manufacturing business is may depend on what you’re producing, said Chris Ulbrich III of Ulbrich Steel in North Haven.
“Certain industries are doing well, like automotive and appliances,” he said. “If you want new appliances, you have a four-month wait because everyone’s at home.”
But the aerospace aspect of their business is slow due in large part to the pandemic, Ulbrich said.
“With commercial aerospace, we’re only flying 800,000 people a day in this country and it used to be 2.4 million a day,” he added. “Certain things are good, certain things are bad, but I think manufacturing, in general, has increased.”
Doug Johnson of Marion Manufacturing in Cheshire said they’re seeing a slow, steady return to pre-COVID levels but are taking a long view.
“It’s still very unpredictable,” he said. “In conversations with our customers, most are optimistic but cautious with expectations for the third quarter.
“We need to get past the election to see a clearer picture of what the next four years will look like.”
Whitman Controls in Bristol has seen a gradual uptick in business from the lows of April and May but has yet to reach pre-pandemic levels, company president William Brame said.
“Some of this was impacted by historically slower summer months, although entering into the fall our backlog of orders remains impacted by a broader slowdown,” Brame said.
“We have seen continued interest in our products and inquiries, but have yet to see the flow through to demand.
“We expect to see an increase in revenue in the fourth quarter relative to the second and third, although we are certainly still weathering headwinds from the shutdown this past spring.”
Disaster relief programs, including the Payroll Protection Program, helped manufacturers weather the coronavirus pandemic, survey responses indicate.
“Of the 82.7% of respondents who say COVID-19 had or will have a negative impact on their cash flow, 72.1% noted they had obtained funds through the Paycheck Protection Program, Main Street Lending Program or other liquidity programs, especially small manufacturers,” the report said.
“More importantly, of those firms taking advantage of such programs, 91.6% reported that those funds helped keep their business afloat, retain their workforce or meet other necessary expenses.”
The loans helped Connecticut manufacturers avoid layoffs.
“The PPP loan was a significant benefit to our organization during the second quarter shutdown, and allowed us to continue operating during a period of significant slowdowns in our industry,” Brame said.
“The loan allowed us to avoid layoffs that would have been inevitable without the support.”
A PPP loan helped Marion Manufacturing avoid layoffs during the slow April-to-June period, Johnson said.
Marion was forced to reduce hours in July and endure a slight staff reduction, he said, but expects to resume normal work schedules by October or November.
“When we signed up for a PPP loan, our sales were down 40% so the loan helped tremendously,” Ulbrich said.
The steel company avoided layoffs while shifting workers to a four-day week but paying them for five.
“It retained our workforce and avoided increasing the unemployment tax,” Ulbrich said.
“I think they did a great job with the PPP loans.”
Other survey findings include:
- Manufacturers expect a modest 1.9% sales increase over the next 12 months
- They expect production to rise 2.2% over the next 12 months
- Full-time employment is expected to grow by less than 1% over the next 12 month
- Employee wages are expected to rise 1.4% over the next 12 months
- Product prices are expected to increase by 1.3% over the next 12 months
- Healthcare costs are expected to grow by 5.8% over the next 12 months
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