Manufacturing leaders are less anxious about an oncoming recession, but workforce constraints and dull demand are leaving them pessimistic, according to a recent survey from the National Association of Manufacturers.
In a sign of growing confidence in the U.S. market, 42% of manufacturers believed the economy would go into a recession in the next year, down from nearly 57% who believed so in June.
However, just over 65% of 323 respondents to an August survey from the industry association felt either very or somewhat positive about their company's outlook. That's the lowest level of optimism since Q2 2020, when levels plunged to 33.9% amid the early days of the COVID-19 pandemic.
The negative sentiments were driven by concerns over attracting and retaining workers, as well as continued stagnant demand, as consumers continue to spend more money on services rather than goods in the post-pandemic era, said Chad Moutray, chief economist at NAM.
Respondents expect employment in the industry to grow by just 0.9% over the next year, a slight drop from 1% in June and the lowest level since Q3 2020.
Despite the slower growth, Moutray noted that the overall operating environment for manufacturers is starting to improve, with sales and production expectations ticking up. Respondents expect both production and sales to grow by 2% over the next year, up from 1.6% each in June.
"I actually think that we have turned the corner and I think you're going to start seeing sentiment surveys starting to move higher over the coming months," Moutray said. "I still think employment is going to still be more sluggish than we would like in 2023 but I'm bullish about manufacturing activity next year."
Moutray highlighted EV, battery and semiconductor investments as particularly strong areas in the industry that he is optimistic will help drive growth.
Manufacturing activity has been sluggish throughout 2023 as companies continue to contend with dual challenges of retaining workers in a tight labor market and cutting costs amid concerns over a weak economy.
Some sectors in particular have struggled, Moutray said, including furniture manufacturing, while others like aerospace and chemicals have seen more continued demand.
“And then anything attached to infrastructure spending is also doing relatively well,” Moutray said. “So all of those are going to continue to be bright spots. And construction numbers, you know obviously we've seen that hockey stick of manufacturing construction data going to a stratospherically high level. Those are all going to provide a lot of dividends for us next year.”
