Manufacturers optimistic about business prospects

By Plant Engineering Staff August 31, 2006

Small and medium-size manufacturers are more optimistic than other industry segments, with many owners and managers projecting revenue growth and continued hiring over the next 12 months, according to the recently released results of an International Profit Associates Small Business Research Board survey.

The IPA SBRB Manufacturing Confidence Index was established at 45 for the first IPA SBRB manufacturing industry poll. By contrast, the aggregated IPA SBRB Small Business Confidence Index for all small and medium-size businesses participating in the survey was 39.3, which represented a drop from 47.3 for the previous poll, concluded in May 2006. Similarly, the confidence of construction and contracting firms dropped to 30.7 from the 49.3 that was registered three months ago.

Nearly half of the manufacturers that responded to the poll indicated that they are forecasting improvement in the economy over the next 12 months, and 50% of them expect revenues to increase during the same period. Nearly 40% said they expect revenues to remain about the same. This compares to the universe of small businesses, of which only 42% believe the economy will improve during the next year and 46% of whom are expecting revenue growth.

Hiring among manufacturers is projected to remain healthy. During the next 12 months, only 5% said they intend to decrease the workforce. Another 45% said it will remain the same and 38% believe they will add employees.

“There is a significant variance in the confidence levels of manufacturers versus those of the general small business community and those of construction companies and contractors. By the end of the year, we will be able to determine whether the perceived strength in manufacturing is based upon existing orders or new contracts,” said Gregg Steinberg, president of IPA.

Finding quality employees was listed by 17% of the manufacturing respondents as their most significant issue. Other major issues were cost of materials (16%), taxes (13%) and economic conditions (12%).

“The fact that 12% of the manufacturers rank the economy as their biggest concern illustrates that there is a pocket of concern about the next 12 months and that some owners and managers are following the indicators should it be necessary to make adjustments necessary to manage profitability,” said Steinberg.

Surprisingly, only 2% of the manufacturers said energy and fuel were there greatest concern, while 15% of the universal group of all small businesses said it was their leading issue.