Manufacturers expect strong growth and strong hiring in 2014

McGladrey Monitor report suggests concerns over taxes and regulations won’t hinder sales and profit increases
By Bob Vavra, Content Manager, CFE Media June 26, 2014

Expectations of growth in the manufacturing sector are greater than concerns over tax and regulatory issues, according to the 2014 McGladrey Manufacturing and Distribution Monitor. The annual report from McGladrey surveyed more than 900 executives at small and mid-sized manufacturers and distributors.

Almost nine out of 10 manufacturers expect growth in 2014 and at a solid rate of above 8% over last year’s growth. That also will translate into profit, as 24% of manufacturing executives expect profits to exceed 10%.

As a result, two-thirds of those surveyed expect in increase hiring in 2014, up from 62% in 2013. Just 5% of manufacturers expect to reduce their staff size, which is the lowest level since before the 2009 recession.

“This year’s survey suggests that we will be celebrating more than just improved balance sheets over the next 12 months,” said Karen Kurek, national  industrial products practice leader for McGladrey, in a press release. “Not only are we seeing a healthy majority of executives planning to turn improved financial results into more jobs, we are seeing a significant drop in the number of companies expecting to cut employees for the first time in several years, suggesting that the influence of the economic downturn may truly be waning.”

Kurek will present the full results of the McGladrey Monitor at the 2014 Global Automation and Manufacturing Summit, presented by CFE Media at this year’s IMTS Show in Chicago. The presentation will be part of the 2014 Industrial Automation North America Pavilion at IMTS, presented by Hannover Fairs USA.

Manufacturing executives did express concern over the impact on state and federal regulations. In fact, more said they were concerned about regulatory issues (66%) than about competition from other companies (63%). Their top concern is the Affordable Care Act, with 69% saying it would limit growth in the coming year. ERA regulations (50%), state regulations (52%) and the reduction in the Federal Reserve’s stimulus program (39%) also were cited as drags on the potential for growth.

“There is no question that the industrial sector is growing, but industry executives clearly believe it could be growing more quickly,” said Kurek. “Manufacturing and distribution executives have made it clear that they are being held back by a regulatory and tax landscape that seems to grow both more complicated and less certain each year. With the recession now comfortably in our rear-view mirror, regulations and taxes have become the top challenges for manufacturers and distributors, and it will continue to influence the growth and competitiveness of the industry until it is addressed.”

Among other issues highlighted by McGladrey in their press release on the Monitor results:

On-shoring vs. offshoring: While 75% of executives in the survey said making products in the United States was important to them, 12% of manufacturers have moved operations offshore in the last year, while 8% have re-shored manufacturing to the U.S. In the future, 14% said they would plan to move operations offshore, while 11% plan to re-shore.

Little concern about data security: Despite several public reports of major data breaches in the past year, the McGladrey Monitor said over 80% of respondents rated their data security a ‘2’ or a ‘3’ on a 5-point scale, and another 11% saw no  risk at all. When asked why, 43% said they didn’t believe their data was a high priority for thieves.

Acting on Affordable Care: Even with their concern over its impact, almost three-quarters of all manufacturers will offer health care coverage in compliance with the Affordable Care Act, while less than 1% said they wouldn’t offer it a pay a penalty.

Details about the 2014 McGladrey Manufacturing and Distribution Monitor Survey can be found on the McGladrey Website, www.mcgladrey.com