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Survey: Manufacturers upbeat but Washington remains top source of concern

This post was reprinted from NAM’s weekly update.

Manufacturers are showing the highest level of business optimism since late 2012, according to the latest NAM/IndustryWeek Survey of Manufacturers.

This optimism is attributed, in part, to manufacturers’ hard-fought legislative and legal gains, including the recent budget deal, which took the specter of a government shutdown off the table for two years, and the NAM’s legal victory against the National Labor Relations Board’s poster rule. The survey results generated news coverage in The Wall Street JournalThe Hill and other media outlets.

The survey found that 86 percent of respondents were either somewhat or very positive about their company’s outlook, the highest sign of manufacturer confidence since the fiscal cliff debate of 2012. According to manufacturers, the biggest drivers for growth will be an improving economy, new product development, increased efficiencies in the production process and exports.

Despite this uptick in optimism, the survey also shows that Washington continues to be the major source of the burdens facing manufacturers. The top business challenge, cited by 79 percent of respondents, was an unfavorable business climate due to taxes, regulations and government uncertainties, including Washington’s inability to solve problems. Rising health care and insurance costs followed closely behind, with uncertainties attributed mostly to the implementation of the Affordable Care Act (ACA).

“Manufacturers in America are making more products today and making them better than ever before, which is why they believe in a bright future of growth and job creation,” said NAM Chief Economist Chad Moutray. “However, Washington’s burdensome regulatory, tax and health care policies still loom large in manufacturers’ business decisions, particularly for the smallest companies. Manufacturers are prepared to make the investments that will jump-start our economy, but we need Washington to work with us, not against us.”

For example, Congress can renew tax incentives for capital investments that expired on December 31, 2013. Nearly two-thirds of manufacturers said they took advantage of either Section 179 expensing, which allowed small businesses to write off up to $500,000 of equipment investments immediately, or bonus depreciation, which allowed businesses of any size to expense 50 percent of the cost of assets bought and placed into service. Roughly 40 percent of small and medium-sized manufacturers said the expiration of these two tax breaks would alter their investment plans for this year.

Key survey findings include the following:

  1. 86 percent of respondents were either somewhat or very positive about their company’s outlook.

  2. Manufacturers plan to increase their spending by 1.9 percent over the next 12 months, up from 1.4 percent in December.

  3. 79 percent cited the unfavorable business climate due to taxes, regulations and government uncertainties as their top business challenge.

  4. 77 percent named rising health care and insurance costs as a primary business challenge, with uncertainties surrounding the ACA.

The NAM/IndustryWeek Survey of Manufacturers was conducted among the NAM’s membership of small, medium and large manufacturers between February 13 and February 28. Responses were from all parts of the country, in a wide variety of manufacturing sectors and in varying size classifications.

Click here for the full survey results. Click here for Moutray’s economic analysis and outlook for 2014 inMember Focus, the NAM’s digital monthly magazine.

Details: Chad Moutray(202) 637-3148.

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