Yet another manufacturing survey this month has warned that increasing commodity prices are a serious threat to growth prospects in the US economy. More than half (66 percent) of the respondents in a national survey of US manufacturing CFOs and senior controllers conducted by Grant Thornton LLP said that their companies intend to raise the sales price of their goods over the next six months, up from 35 percent six months earlier.
The results are not surprising, said Wally Gruenes, Grant Thornton’s national managing partner for Consumer and Industrial Products, in a press release:
This was to be expected given the increase in commodity raw material costs experienced by most manufacturers over the last 12 months. With the precipitous increase in these commodity prices in recent months, manufacturers have no choice but to pass along such increases to their customers. While they have done a good job of improving operational efficiencies and driving down costs over the past three years, manufacturers simply could not drive down their conversion costs enough to absorb these raw material price increases.
On the upside, 47 percent of CFOs surveyed expect company hiring to increase (only 18 percent intended to increase head count six months ago).
Respondents were asked to identify which type(s) of pricing pressure they were most concerned about, and could select more than one answer. Respondents were most concerned about raw materials such as cotton, metals, and petroleum-based product (96 percent), followed by energy (58 percent); employee benefits (58 percent); company insurance, not including health care (2 percent); and other (10 percent).
With the exception of cotton, all of the raw materials of concern have an impact on the electronics supply chain. None of the respondents expect prices to decrease; 34 percent expect prices to remain the same. Additionally, 80 percent of those surveyed believe the recent earthquake in Japan will have an impact on the US economy.