Eighty-six percent of large manufacturing companies and 82 percent of smaller ones described their economic outlook as "positive" in a June survey of 200 firms conducted by the National Association of Manufacturers (NAM) and Fortune magazine. Large firms were defined as those with 1,000 or more employees.
Though manufacturers’ optimism softened modestly in the second quarter from 7-year highs reached in 2004, both large and small manufacturers remained significantly more bullish in the second quarter than during the period between mid-2000 and mid-2003. Small manufacturers were as confident about the future, and large companies were even more confident than during the period between 1998 and mid-2000.
"The survey results make clear that the manufacturing recovery will continue at least through the first half of next year," explained NAM Chief Economist David Huether. "While the 86 percent of large companies that had a positive business outlook in the second quarter was below the average since the third quarter of 2003, it was significantly higher than the prior 3 years and higher than in the late 1990s before the recession. Meanwhile, small companies are as confident as they’ve been during the past 7 years."
Large company respondents to the June survey expected their sales to rise by 4.9 percent over the next 12 months. "While this is modestly lower than the prior period beginning in the third quarter of 2003, it is much higher than the mid-2000 to mid-2003 time frame and nearly equal to the outlook in the late 1990s," Mr. Huether said. "Small firms expected sales to grow a more-modest 3.8 percent."
For pricing, large company survey respondents expected they would be able to increase their prices by 1.6 percent over the next 12 months. "This is a continuation of a trend of modestly higher pricing power that began in the second half of 2003," Mr. Huether said. "For smaller firms, prices are expected to increase a faster 2.1 percent. While manufacturers’ pricing power remains modest compared to other sectors, it has nonetheless accelerated over the past 2 years."
Large company survey respondents said they will increase capital spending on equipment and software by 2.6 percent over the next 12 months, and smaller firms say they’ll boost capital purchases by 2.7 percent over the coming four quarters.
As far as inventories, large company survey respondents anticipated reducing inventories 2.5 percent over the coming 12 months, and smaller firms expected inventories to rise modestly by 0.5 percent.
Employment forecasts were basically flat for manufacturing over the next 12 months, with large company respondents expecting employment to decline by 0.5 percent and smaller firms expecting employment to grow by 1.6 percent.
Large company survey respondents expected employee wages to increase by 2 percent over the coming 12 months. "This is slower than the average pace since 1998," reported Mr. Huether. "But smaller firms’ wages are expected to rise a faster 2.3 percent over the next year -- slightly higher than expectations from mid-2003 through the first quarter of 2005. U.S. Department of Labor data show that in recent years, accelerating benefit costs such as health care have displaced wage growth. Our survey results suggest this trend will continue in manufacturing over the next 12 months," he concluded.
to Daily News