American manufacturers are brimming with optimism despite supply chain and persistent workforce challenges, a new survey from the National Association of Manufacturers shows.

Nearly 88% of manufacturers who participated in NAM’s Manufacturers’ Outlook Survey for the first quarter of 2021 are positive about their own company’s prospects—the highest rate in two years.

Source: National Association of Manufacturers first quarter 2021 Outlook Survey.

It marks the third consecutive increase in optimism in the quarterly survey and a dramatic turnaround since the second quarter of 2020, when only 34% of U.S. manufacturers expressed optimism—the lowest since the 2008-2010 recession.

“More importantly, this suggests that manufacturers had the strongest outlook in two years, since the first quarter of 2019,” the survey said.

“It’s critical that we focus on and pass federal and state policies to ensure this optimistic outlook becomes a reality,” CBIA president and CEO Chris DiPentima said.

“We cannot waste this opportunity to leverage this business confidence to rebuild the Connecticut and national manufacturing sectors, which are critical to overall economic recovery and growth.”

Sales Growth

The survey of 450 manufacturers of all sizes was conducted Feb. 19 to March 5, roughly one year after the coronavirus pandemic began.

It showed an expected 4.9% growth rate for sales over the next 12 months, the highest since the second quarter of 2018, when it was 3.4%.

Manufacturers will need to balance those positives against an expected 6.2% growth rate in raw material prices and other input costs.

And it showed an expected 3.9% growth rate for the price of a company’s products over the next 12 months—a record high.

But manufacturers will need to balance those positives against an expected 6.2% growth rate in raw material prices and other input costs—another record high.

In addition, manufacturers are anticipating a 7.2% increase in health insurance costs over the next 12 months, the highest since the third quarter of 2018.

Concerns

The cost of raw materials is the top concern among manufacturers in this survey, with 76% identifying it as their most pressing business challenge.

Second at 66% is attracting and retaining a quality workforce. Usually, that’s the survey’s No. 1 business challenge.

Still, it speaks “to the structural skills mismatches that many manufacturers face regarding employment,” the survey noted.

"It's critical that we double and triple our efforts around workforce development programs."

CBIA's Chris DiPentima

Passage of a major workforce training investment bill would positively impact business plans and outlook for 73% of manufacturers, the survey showed.

“This mirrors exactly what we have heard and continue to hear from the Connecticut manufacturing base, and many other industry sectors that are challenged with recruiting and retaining talent,” DiPentima said.

“It shows why it’s critical that we continue to double and triple our efforts around workforce development programs that can have a significant impact and are financially sustainable.”

Workforce Development

DiPentima applauded Gov. Ned Lamont’s commitment to workforce development, including revamping the Governor's Workforce Council, creating a workforce development office, and appointing a cabinet level chief manufacturing officer.

“It’s imperative that Connecticut has solutions in place that grow the workforce of today and the pipeline for tomorrow in order to capitalize on the significant job creation expected as we emerge from the pandemic,” he said.

A major bill that concerns manufacturers is the Protecting the Right to Organize Act, which awaits Senate action after the U.S. House of Representatives approved it March 9.

"Every job our manufacturers create generates another three to four private sector jobs."

DiPentima

NAM said the bill “makes significant changes to HR, workplace and labor relations laws, including eliminating the secret ballot in union elections, removing state right-to-work laws, giving unions access to personal employee information, eliminating captive audience meetings and others.”

In fact, 97% of respondents said the bill would hurt their business operations—and their relationships with employees.

“This is another example of how proposed policies can erode business confidence and squander the tremendous opportunity that we have nationally, and specifically in Connecticut, to change the narrative and rebuild through policies that embrace and nurture the business community,” DiPentima said.

“Every job our manufacturers create generates another three to four private sector jobs—highlighting the impact our manufacturers have on their local communities.”

Business Climate

An unfavorable business climate, including taxes and regulations, was a concern for 44% of respondents, the highest reading for the business climate since the fourth quarter of 2017 when Congress enacted tax reform.

“Along those lines, 87% of respondents said their company would find it more difficult to expand their workforce, invest in new equipment, or expand facilities if Congress increased the tax burden on income from manufacturing activities,” the survey said.

Conversely, if lawmakers adopted policies that gave tax incentives for manufacturing investment, workforce training, research and development, capital equipment purchases, or debt financing new investments, more than 80% said their company would find it easier to expand their domestic workforce. 

Other survey findings include:

  • A 2.7% expected growth rate for full-time employment over the next 12 months
  • A 2.7% expected growth rate for capital investments over the next 12 months
  • A 2.5% expected growth rate of employee wages over the next 12 months
  • A 1.1% expected growth rate of exports over the next 12 months
  • A 1.1% expected growth rate of inventories over the next 12 months

Meanwhile, 70% of respondents said passage of a major infrastructure bill would have a positive impact on their company’s business plans and outlook.