July 25, 2019

Manufacturers Remain Positive in 2019

Atlanta area and Georgia manufacturing companies are facing some familiar and many new business challenges. These often include finding and retaining qualified employees, knowledge transfer, intense competition from offshore providers, tariff concerns and even the integration of artificial intelligence and machine learning. While the challenges persist, the overall outlook for industry companies appears to be positive. According to the National Association of Manufacturers (NAM) Manufacturing Outlook Survey (Second Quarter 2019), four out of five manufacturers indicated a positive outlook for their business in 2019. This was reinforced by the fact that inventory and production levels are expected to increase while exports are also expected to grow. One pressing concern is the impact of tariff uncertainties industry-wide. The survey findings help to provide insights into what Georgia manufacturers can expect in the coming months. To help clients, prospects and others analyze the results, Wilson Lewis has provided a summary of the key findings below.

About the Survey

The survey was conducted in late May and included responses from 689 participants. Company size ranged from those with fewer than 50 to those with over 500 employees. There were 155 responses from small manufacturers, 337 responses from medium-sized manufacturers and 197 from large manufacturers.

Key Survey Findings

• Top Business Concerns– Uncovering the top issues and business challenges faced in the industry was an area of interest. According to the survey, 68.8% indicated that attracting and retaining a quality workforce was a concern, 56% indicated trade uncertainties, 55% indicated rising healthcare costs, 46% indicated increasing raw material costs and 31% identified changes to transportation and logistics costs. Other concerns included slower export sales, unfavorable business climate (regulations and taxes) and challenges with access to capital.
• Business Outlook – The confluence of business concerns can impact a company’s outlook. The more optimistic the better for all involved. According to the survey, 25% of respondents are very positive about their outlook, 55% are somewhat positive, 19% are somewhat negative and 1.6% are very negative. Overall, 79.8% of respondents are positive about their company’s outlook. This represents a 10% decline from the first quarter survey which was at 89.5%.
• Sales Growth – A positive outlook is typically accompanied by an expected increase in sales. According to the survey, 14% of respondents expect sales to increase by greater than ten percent, 25% expect an increase between five and ten percent, 26% expect an increase of up to five percent, 21% expect no increase in sales. Only 12% expect sales to decrease by varying amounts.
• Raw Material Costs – Changes to the cost of raw materials will have an impact on a company’s overall cost structure and pricing strategy. According to the survey, 6.7% of respondents expect raw material costs to increase more than ten percent, 20% expect an increase of between five to ten percent, 45% expect an increase of up to five percent and 20% costs to remain the same. Only 7% expect costs to decrease by varying amounts.
• Pricing Changes – The survey wanted to determine if any pricing changes are expected to offset the expected cost increases. According to the survey, 2.6% of respondents indicated they expect a price increase of greater than 10 percent, 13% expect a price increase between five and ten percent, 43% expect an increase of up to five percent, 33% expect prices to stay the same and roughly 8% expect some level of pricing decrease.
• Capital Investment – One indication of a company’s future outlook is the anticipated level of capital investment. According to the survey, 14% of respondents expect capital investments to increase by more than ten percent, 15% expect an increase of between five and ten percent, 15% expect an increase of up to five percent and 43% expect it to stay the same. Roughly 12% expect there to be a decrease in capital investment in the next year.

Contact Us

While Georgia manufacturing companies are facing uncertainty, there is certainly a positive outlook for the coming months. The information contained in the survey illustrates how changing costs are impacting pricing and expected production. If you have questions about the survey findings or need assistance with a manufacturing tax or accounting issue, Wilson Lewis can help! For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.