Despite nagging fears of a recession, manufacturing execs are optimistic about the future, with a majority planning to increase hiring and spend on technology.
IT’s been a tough year for manufacturers, with supply-chain snags, inflation and fears of a recession. Yet a shocking 95% of manufacturing executives said they were optimistic about the future, according to a recent poll by Forbes, Xometry and Zogby.
The nationwide survey of 150 manufacturing executives in late December found that three-fifths (60%) of executives said “the future looks bright,” while another one-third (35%) said they “see the light at the end of the tunnel.”
Which of the following statements comes closer to your view regarding the overall current health of your company?
That optimism is surprising given an economic backdrop of persistent inflation that has cut into Americans’ wallets and created political peril for the Biden Administration, ongoing supply-chain difficulties that have put a drag on manufacturing, nagging fears of a recession and almost daily reminders that the Covid-19 pandemic has yet to run its course.
Yet 71% of executives surveyed reported that sales and earnings were better in 2022 than in 2021, and only 10% said that they’d been worse. While 87% of the executives said they believed a recession was at least somewhat likely this year, those numbers were down slightly from the last poll in August, when 92% said that. Larger companies have recovered faster than smaller ones, with 82% of companies with revenue above $100 million saying sales were up, compared with 61% for those under $100 million.
Regarding sales, has 2022 been better, worse or about the same?
Despite their optimism, the executives were mixed in their plans for hiring and capital expenditures, with some saying they planned for increases on both and others gearing up for cuts. That mixed outlook may be a sign that 2023 will be a year of differentiation, in which some firms show significant improvement, while others fall further behind.
To deal with persistent supply-chain difficulties, the vast majority of executives surveyed (79%) said they had stockpiled goods. They’re not alone. In October, retail inventories reached $765 billion, up 21% from the previous year, according to Census Bureau data. Big-name companies including Nike and Gap reported goods piling up heading into the holiday season, and many retailers started discounting early in order to clear out merchandise before year end. In our survey, 89% said they believed supply-chain disruptions would continue well into this year.
Have you stockpiled goods and materials in anticipation of a supply chain shock in 2023?
Despite this, with inflation continuing to rise, 89% of companies said they were likely to raise prices this year, with 54% saying they were “definitely or very likely” to do so. That’s consistent with our previous poll, when 87% said they’d hike prices in 2023. Most of those planning price hikes this year (78%) said they’d be between 5% and 15%, though a small number (7%) said they expected to increase prices by more than 20%.
How likely are you to raise prices in 2023?
The mixed messages about the future showed in plans for both hiring and spending. Despite near-daily reports of layoffs, especially among tech companies, more than half of manufacturing executives surveyed (52%) said they planned to hire more people this year, and another third (36%) said hiring would remain at the same level. Of those planning to add to their workforce, 83% said they would hire between 5% and 15% more people. Yet two-fifths of respondents (44%) said they had plans for layoffs. Smaller companies (under $100 million in sales) were struggling more than larger ones. Among smaller companies, 56% planned workforce cuts, while only 33% of larger companies did.
The majority of respondents (61%) also said their company was increasing wages in an effort to attract workers. More than three-quarters (77%) said they were providing incentives, such as cash, bonuses, profit-sharing, gift cards and gym memberships, to lure new employees. Those efforts come as U.S. manufacturing has faced a worker shortage that could result in 2.1 million unfilled jobs by 2030. “Higher salaries, profit-sharing and improved benefits package,” one executive surveyed said in response to an open-ended question about incentives offered. “Great pay and opportunities to grow in the company,” said another.
Is your company increasing or decreasing wages for employees?
The mixed messages persisted in spending patterns. More than half (51%) said they were making cuts to free up resources during tough times. Yet nearly three-quarters (71%) said they were bumping up spending on research and development, while another quarter (26%) said that levels of R&D would remain the same. Only 3% said they’d cut such spending since last year.
Technology? While the majority of executives said they were investing in workforce automation (72%) and artificial intelligence (58%), less than half (47%) said they were investing in robotics to handle future supply-chain shocks. Not surprisingly, larger companies were more likely to make such investments, with 67% of firms with $100 million or more in revenue putting money into AI and 52% doing so in robotics, compared with 49% and 43% for firms with less than $100 million in sales.
Another way manufacturing executives are dealing with the supply-chain difficulties is moving factories closer to home. More than half (55%) said they were looking to reshore some of their operations, and nearly all of those (95%) plan to do so this year. Their moves come as China’s closing and reopening of factories due to shifts in Covid-19 policies has been chaotic, pushing many companies to search for alternatives. Even Apple is reportedly considering relocating some assembly of MacBooks from China to Vietnam.
The executives talk of relocating factories comes as the vast majority (89%) expect continued supply-chain disruptions in 2023. Nearly half (47%) said they were having difficulty getting semiconductors, while almost two-thirds (64%) said finding raw materials was tough. More than half (59%) said they were having difficulties getting goods and parts from China.
As China pulled back from the Zero-Covid policy that shut factories and snarled supply chains, executives were mixed in how they viewed the impact. “I think it may improve products’ availability,” one said. “It will help us getting much-needed raw material,” said another. But others worried about the downside. “It’s not good. We could have another Covid epidemic,” said one. “Counterfeiting will increase,” said another.
The poll, a joint effort of Forbes and manufacturing company Xometry, powered by veteran polling firm John Zogby Strategies, aimed to gauge how manufacturers have been handling an environment of rising costs, supply-chain difficulties and potential recession. This is our second poll; the first was conducted in August.
The margin of error on the poll was plus or minus 8 percentage points. Since executives are a tiny segment of the population, a sample size greater than 100 is considered more than representative.
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Source: https://www.forbes.com/sites/amyfeldman/2023/01/10/despite-warning-signs-95-of-manufacturing-executives-say-theyre-optimistic-according-to-a-new-poll-by-forbes-xometry-and-zogby/