Midsized Manufacturers Upbeat About 2012

US manufacturers are slightly more optimistic about their business in 2012 than they were a year ago, according to a recent survey of small and midsized manufacturing companies. The chief financial officers (CFOs) of these businesses continue to see solid signs of economic recovery in US manufacturing. But, while these businesses are planning more hiring, wage increases, and capital expenditures, the availability of skilled workers is a growing challenge.

Although these CFOs are more optimistic about their own financial prospects in 2012, they are less confident about the US economy, according to Prime Advantage, a consortium for midsized manufacturers. Louise O’Sullivan, founder, president, and CEO of Prime Advantage, observed in a press release:

Our members, and manufacturers in general, have performed well and the majority are back to pre-recession levels, which speaks to the health of their organizations. Our goal remains the same, which is to deliver cost reduction opportunities for these companies, reduce risk within their supply chains and position them with best-in-class supply partners that align with their growth strategies.

Here are some of the specific findings from the survey:

• Sixty-nine percent of executives are more optimistic about their companies’ financial prospects in 2012 (compared to 67% in 2011)
• While more CFOs are optimistic about their own financial prospects, fewer respondents are more optimistic about the U.S. economy than in 2011, with 67% feeling better about 2012 than the prior year (compared to 74% in 2011)
• Fifty-nine percent of manufacturers expect moderate to high growth from their key customers in 2012
• Nearly 95% of CFOs plan to invest in manufacturing equipment and 63% in computer hardware this year
• CFOs report that customers are less affected by tight credit, with 24% of respondents in 2012 stating customers are not affected by the cost or availability of credit (compared to 14% in 2011)
• Health insurance premiums increased for most respondents, but at a lesser rate, with only 33% indicating an increase of more than 11% (down from 48% measured in 2010)
• Top priorities in 2012 include cutting operational costs, developing new products and services, and long-term strategic planning (which rose 13 points from 2011).

New orders to US manufacturers are beginning to tick up, according to Prime Advantage. The majority of CFOs surveyed report increases in their own new order pipelines, with 57 percent citing more new orders now than at this time in 2011. Manufacturing CFOs are also optimistic about the business prospects of their key customers this year, the survey found, with 55 percent expecting to see their customers’ businesses grow moderately in 2012.

However, continuing uncertainty about the financial strength of the European Union tempers this optimism. When asked to cite the top potential threats to US economic growth, 90 percent of the CFOs were most concerned with the European fiscal situation (90 percent), followed by the US budget deficit (69 percent), and the cost of healthcare reform (68 percent).

Operationally, manufacturing companies are switching their emphasis from reacting to market conditions to planning for the future, Prime Advantage said. CFOs expect to focus on cutting operational costs, developing new products, and long-term strategic planning. The number of respondents citing long-term strategic planning increased by 13 percent from 2011 and 26 percent from 2010. These results indicate that companies are employing proactive growth strategies rather than reactive strategies that reflected the prevailing uncertainty during and post-recession, the survey concludes.