The NAM’s quarterly survey of manufacturers highlights widespread concerns that a recession may be on the horizon, as well as ongoing worries about inflation, among other issues.
A recession? 59.3% of survey respondents said they believed inflationary pressures would make a recession more likely in the next year.
- 52% of respondents said they did not think the Fed could prevent a recession in 2022 or 2023.
The impact: Three quarters of manufacturers felt inflationary pressures were worse in quarter two than they were six months ago.
- For manufacturing firms that have had to raise prices, the top sources of inflation were raw material prices (97.2%), freight and transportation costs (83.9%), wages and salaries (79.5%), and energy costs (55.9%).
Materials costs: Manufacturers said they expect raw material costs to rise 6.9%, slightly less than in quarter one but still higher than normal.
- Increased raw material costs were the most common primary business challenge, cited by 90.1% of survey respondents.
Supply chain woes: 85.5% of manufacturers cited supply chain challenges as a primary concern and most manufacturers were not optimistic about supply chain disruptions easing up in 2022.
- Only 14.6% of respondents said they expected the supply chain to improve by the end of the year, with 53.1% saying they expect some abatement in 2023.
Optimism persists: 82.6% of manufacturing leaders felt somewhat or very positive about their company outlook, down from 88.8% in the first quarter.
- Despite the drop, it was the sixth consecutive quarter in which the figure exceeded 80%.
- Small manufacturers with less than 50 employees were less optimistic (72.5% positive) than their medium (85.5% positive) and large (84.8% positive) counterparts.
Our take: “Through multiple crises, manufacturers have proven remarkably resilient, but there’s no mistaking there are darker clouds on the horizon.” said NAM President and CEO Jay Timmons.
- Congress should act on “manufacturers’ solutions to our supply chain challenges and pass the China competition bill—or Bipartisan Innovation Act,” he continued.
- “Though it won’t solve every issue, this will give us many of the tools needed to ramp up domestic manufacturing and strengthen our supply chains. That’s why 88% of manufacturers in our survey see it as an important piece of legislation—and Congress needs to move swiftly to get it to President Biden’s desk.”