These are interesting times for US manufacturers. Most are seeing strong orders and sales, while at the same time many are battling slow deliveries from suppliers, lingering COVID issues, and significant worker shortages.
Manufacturers have reported about 800,000 job openings or more - a very elevated rate – for 10 straight months, despite rising wages
Supply Chain Digest Says... |
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The National Association of Manufacturers (NAM) captures much of this and other interesting data points in its just released report based on its quarterly survey of manufacturers. The surveys were conducted the last two weeks in February.
An amazing 88.8% of respondents felt either somewhat or very positive about their company outlook, up from 86.8% in the fourth quarter. Over the past five quarters, this headline index has averaged 88.1%, a very strong reading.
Small manufacturers (those with fewer than 50 employees) were again a bit less upbeat in their outlook, with 80.3% positive, compared with 91.2% for their medium (50 to 499 employees) and 87.8% for large (500 or more employees) manufacturing counterparts. Their expected growth rates for sales, production, employment and capital spending were also lower than their larger peers.
Despite the worker shortage, manufacturers on average expect full-time employment to rise 3.7% over the next 12 months, just shy of the record in September (3.8%). But respondents also anticipate employee wages rising over the next year by 3.9% on average, the fastest pace in the survey’s history, which dates to the fourth quarter of 1997.
But manufacturers also predict that costs will continue to rise rapidly. Manufacturers expect raw material costs to rise 7.1%, which is up from 6.5% in the fourth quarter and not far from the recent high of 7.5% reading in June of last year. Manufacturing companies forecast 6.1% growth in prices for their products over the next 12 months, a record inflation rate for the survey.
The responses relative to largest challenges follow suit. Supply chain issues topped the list of primary business challenges in the first quarter, cited by 88.1% of respondents. In addition to supply chain issues, other top challenges in the first quarter include increased raw material costs (85.7%), the inability to attract and retain a quality workforce (79.0%), transportation and logistics costs (72.7%) and rising health care and insurance costs (48.6%). (See graphic below.)
Source: NAM
Those completing the survey were also asked when they expect supply chain disruptions to abate. Just 2.6% anticipate these disruptions to end in the first half of 2022, but 40.4% expect them to improve in the second half of this year. Overall, roughly three quarters of respondents predict that supply chain disruptions will finally abate by the end of the first half of 2023, while almost 15% believe that supply chain problems will not get better until at least the second half of 2023 or later, with 9.7% uncertain.
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More than 83% of manufacturers said that they have had to increase wages and benefits for existing and new employees to meet demand. In addition, companies have had to increase inventories of raw materials and other inputs (68.4%), brought in additional staffing to meet demand (61.4%), utilized alternative modes of transportation or logistics (58.8%), explored more domestic U.S. sourcing or production (57.9%) and reevaluated their company’s entire supply chain (52.6%).
On the topic of workforce, 89.4% had unfilled positions within their companies for which they were struggling to find qualified applicants. To address the tight labor market, a full 93.2% said that they have had to increase wages and salaries, while many also tried tactics such as offering more flexible schedules. (See graphic below.)
Source: NAM
Also, manufacturers predict health insurance costs will rise a steep 7.9% over the next 12 months, though down from 8.1% in the fourth quarter, which was the fastest pace in four years. In the latest figures, roughly three-quarters expect costs to increase 5% or more, including one third seeing costs rising 10% or more.
These are interesting times for manufacturers for sure.
There is a lot more information in the full report, which can be found from NAM here.
What are your thoughts NAM data ? Will it help US manufacturing? Let us know your thoughts at the Feedback section below.
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