Manufacturing survey: Outlook is cautiously optimistic

Prime Advantage has issued results of its third annual manufacturing survey, which show that manufacturers are retrenching, but looking forward to economic recovery.

Prime Advantage (Chicago, Ill., USA), a buying consortium for midsized industrial manufacturers, announced the findings of its third Group Outlook Survey, revealing the top economic concerns of midsized industrial manufacturers, as well as an opportunistic outlook for 2009 and beyond. Survey findings reveal not only that industrial manufacturers are prepared for another tough year in 2009, but that they are counting on the conservative measures taken over the past couple years to help carry them through to better times by year end.

Among the highlights of the survey findings, 87 percent expect to introduce new products in 2009, even as 62 percent of respondents are also expecting some level of revenue decline in 2009. And even as most raw material costs continue to drop, managing these costs continues to be a top priority for manufacturers that are coping with varying degrees of revenue shortfalls.

Survey data was collected in late February from 103 representatives of industrial manufacturing companies, including business owners, vice presidents of procurement and purchasing professionals.

Twenty-eight percent of respondents expect revenue to stay the same as 2008, while six percent expect revenue to increase up to ten percent and only three percent expect an increase of more than ten percent. Among the 62 percent that anticipate revenue declines, 37 percent of these reported that they expect revenues in 2009 to decrease up to ten percent, in comparison to 2008, while another 25 percent expect revenues to decrease more than ten percent.

This is in agreement with other business indexes, such as ISM data that shows the PMI stuck in the mid-30s for the past three months and with U.S. Department of Commerce trade data that shows the export of U.S. manufactured goods fell 20 percent in January 2009, as compared to one year earlier.

Sixty-six percent said capital spending for U.S. locations, including significant capital improvements or new purchases of property or equipment, is expected to decrease from 2008 levels. Thirty-four percent expect capital spending to be equal to or more than 2008 spending amounts.  

The top external concern facing manufacturing is customer demand at 83 percent. "Credit markets and interest rates" was the next greatest concern, with 44 percent reporting, and volatility of the dollar came in as the third most frequently listed concern at 37 percent. For the third Group Outlook Survey in a row, raw material costs (such as metals and plastics) are the top cost pressure concern, as cited by 67 percent of survey respondents. This has come down from the last survey, when 93 percent mentioned it as the top cost pressure concern in July 2008.

Overhead costs ranked as the second greatest cost pressure at 50 percent (and up 39 percent from the July 2008 Group Outlook Survey, when it was cited by just 11 percent of respondents). Logistics/supply chain costs continue to rank among the top three concerns, with 49 percent in agreement. Other cost pressure concerns in 2009 include healthcare (43 percent), energy (27 percent), foreign competition (27 percent), inflation (25 percent) and labor (23 percent).