Manufacturers seem to be more optimistic about revenues and employment for the rest of 2013 despite concerns about federal regulations and fiscal policy uncertainties, according to Prime Advantage’s twelfth semi-annual Group Outlook Survey of purchasing professionals.
Summary of Findings
- Ninety-seven percent of respondents reported they expect revenues to be better than or equal to the first half of 2013. Forty-two percent anticipate revenue growth will be higher in 2H 2013 than in 1H 2013.
- The level of capital expenditures is expected to increase at 1 out of 3 companies in the second half of 2013.
- Forty-seven percent of companies expect to hire in the next six months and fewer than 3 percent are planning layoffs.
- Concern about upward cost pressure on raw materials has declined sharply from previous periods, (63 percent of respondents expressed concern, down from 90 percent in February 2013).
- The majority of respondents (62 percent) believe fiscal policy uncertainties have had a negative impact on their business and the overall economy.
Strong Revenues and Stable Spending
Forty-two percent of small and midsize manufacturers anticipate revenues will increase in the second half of 2013. A surge in customer demand (55 percent) and launch of new product lines (48 percent) were most often cited as the reasons for the expected increase.
Capital expenditures are holding strong for U.S. manufacturers, as 1-in-3 companies is planning an increase in capital expenditures in the next six months.
Strong Hiring in Manufacturing
A record number (47 percent) of small and midsize manufacturers expect to hire in the next six months. This result is the highest level seen in these second half surveys since the start of recession (up from 39 percent in 2012 and 36 percent in 2011). Meanwhile, less than 3 percent of respondents predict layoffs by year-end.
Procurement professionals continue to cite the cost of raw materials as their top area of focus, but to a lesser degree than seen in prior surveys. Focusing on procurement processes was the second most frequently cited concern, followed by the cost of baseline materials for components, such as oil and gas.
When asked about which areas of cost pressure respondents are most concerned about, raw materials once again received the most votes, but at the lowest level ever surveyed (63 percent, down from 90 percent in February 2013). Healthcare cost pressures remain a strong concern, as indicated by 61 percent of respondents (up from 57 percent in February 2013 and 58 percent a year ago).
The majority of small and midsized manufacturers (62 percent) felt that fiscal policy uncertainties were negatively affecting their business and the overall economy. Most respondents (58 percent) anticipate the negative impact to continue into the next 12 months.
Survey respondents identified the top barriers to business growth over the next 12 months: legislative and regulatory pressures (47 percent); oil and energy pricing (39 percent) and lack of qualified workers (32 percent).
As the Conflict Minerals Rule, an SEC regulation that requires companies to disclose whether conflict minerals are used in their products, is about to come in effect in May 2014, 15 percent of respondents are already feeling the impact of this rule on their organization. Another 40 percent of respondents are not yet sure if their company will be affected.