Q4 2021 Manufacturer's Survey Indicates Positive Outlook

Manufacturing companies continue to report strong demand and volume growth on their products, with production rebounding to pre-COVID levels. Not surprisingly, a tight supply of workers and supply chain disruptions, along with soaring costs of raw materials, challenge manufacturing companies of all sizes. Even given all of this, the outlook is still largely very positive, with 86.8 percent of respondents expressing a positive outlook for 2022 and beyond.

These are some of the key conclusions from the National Association of Manufacturers (NAM) Fourth Quarter 2021 Outlook Survey. The quarterly survey was conducted from November 19 to December 3, 2021 among 389 respondents (22% small, 49% medium, and 29% large manufacturers).

When Will It End?

The natural question is “When will the supply chain disruptions end?” Most respondents estimated that it would be the second half of 2022 (38.3%) or the first half of 2023 (17.3%) before they would experience relief from supply chain disruptions. Fewer respondents predicted this for Q1 2022 (3%) or Q2 2022 (11.8%). The remainder responded that supply chain disruptions would end at “some later date” (10.3%), uncertain (17%) or were already improved or back to normal (1.9%).

Rising Wages and Workforce shortages

Wage inflation and workforce shortages have clearly been challenges:

• 71% of respondents indicated it has impacted the timeliness of product deliveries;
• 71% indicated it impacted timeliness of the production process;
• 70% increased compensation sharply to remain competitive; and
• 45% were unable to take on new business (lost revenue opportunities)

Growth Is Expected to Continue

Over the next 12 months, respondents anticipate 3.4% growth in the number of full time employees, 5.2% growth in sales, and a 3.3% increase in capital investment growth (the record high expectation for capital investment growth was 3.8% in Sept 2021).

Inflationary pressures are real. The expected growth rate of price of products the company will sell over next twelve months was 5.9%, a record high going all the way back to first NAM survey in 1997. Further, over the next 12 months:

• 2.6% inventory growth
• 4.8% production growth
• 3.8% EE wage growth (a record high dating back to first survey in 1997)
• 6.5% raw material price and input costs growth
• 8.1% growth in health insurance costs, the highest increase since 2017

These NAM survey results confirm what Weaver clients are telling us: their two biggest challenges are supply chain (availability and cost of materials) and labor shortages and cost pressures.

Watch Weaver.com for information about the new survey in early April. For questions or more information, contact us.

Authored by Chris Boyd, CPA.

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