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IMA Energy & Environment Blog

NAM Outlook Survey: Cautiously Encouraging, with Business Environment Worries

In the latest NAM Manufacturers’ Outlook Survey, after several quarters of declining sentiment about the economic outlook, the latest data show some stabilization. There are serious concerns over rising healthcare costs and a perception that growth rates will still be sluggish over the next 12 months. Large manufacturers were more upbeat about their outlook this quarter; small and medium-sized manufacturers’ outlook has gone down.

Sixty-one percent of manufacturers are either somewhat or very positive about their own company’s outlook, easing slightly from 61.7 percent who said the same thing in June. However, the outlook remained stronger than at the end of 2015 and the beginning of this year, showing progress from earlier softness. At the same time, this marks the fifth consecutive quarter when positive responses about the outlook have fallen below the historic average of 73.0 percent.

Sales were seen growing by 1.9 percent and production by 2.1 percent over the next 12 months, up from 1.6 percent and 1.5 percent. Companies’ capital investment plans tended to increase with size. Smaller entities expected capital spending to decline by 0.3 percent in the next year; medium-sized and large manufacturers predicted capital investment growth of 0.8 percent and 1.5 percent, respectively. One-quarter of respondents expect to increase their capital investments relative to last year, while an almost identical percentage expect to decrease capital expenditures.

The current data suggest that manufacturing production should grow 1.5 percent year-over-year in the first quarter of 2017, indicating that activity should continue to pick up in the coming months, with output in the sector currently growing by 0.4 percent year-over-year. At the same time, growth will remain more subdued than we would prefer. In terms of monetary policy, 45.5 percent of respondents felt the Federal Reserve would hike short-term interest rates at its December 13–14 meeting, with just 5.7 percent thinking it would act at its upcoming September meeting.

Manufacturers consistently rank an unfavorable business environment among their top challenges. This view stems from rising regulatory burdens as well as a desire for tax reform and frustrations with higher insurance costs. In the last survey, 82.6 percent of respondents said their company’s total spending on state and federal regulatory compliance had increased either modestly or substantially over the past few years. Therefore, it is not surprising that in this survey 88.8 percent either somewhat or strongly disagreed with the notion that the federal government carefully considers the point of view of small business owners when it imposes new regulations.

Details: Chad Moutray, (202) 637-3148.