A variety of sources continue to cite an improving outlook for the U.S. manufacturing economy. Two of the latest come from the American Machine Tool Distributors’ Association (AMTDA, www.amtda.org), and from Prime Advantage Corp. ( www.primeadvantage.com), a Chicago-based buying consortium for mid-sized manufacturers that recently reported on a survey of its member companies’ chief financial officers (CFOs).

The AMTDA reported on March 8 that U.S. consumption of domestic and foreign machine tools and related equipment technology totaled $131 million in January, based on companies participating in the United States Manufacturing Technology Consumption (USMTC) program. That number was down by 40 percent from December, but up from the total of $104 million reported for January 2009, the AMTDA said.

“Many customers placed orders in December to take advantage of tax relief measures, pulling orders out of January 2010,” said Peter Borden, AMTDA president. “The good news is that January 2010 orders are still 26 percent ahead of January 2009. Fortunately, there are measures moving through Congress that will expand these benefits, incentivizing manufacturers to invest in capital equipment in 2010.”

Upbeat CFOs

The AMTDA report came on the heels of a March 5 release from Prime Advantage citing widespread optimism about the 2010 economy from member company CFOs. This coincides with the latest U.S. Federal Reserve data showing growth in industrial output for the seventh consecutive month, the company pointed out, even as the Producer Price Index showed energy costs rising in January.

Responses to several questions in the 2010 Group CFO Survey indicate that optimism has returned to small and mid-sized manufacturing enterprises in 2010, Prime Advantage said. These include the finding that 67 percent of respondents reported feeling more optimistic about the economy compared to 2009, and that 64 percent were more optimistic about the financial prospects for their own companies. In addition, in ranking their own companies’ financial prospects for 2010 on a scale of 1-10, with 10 being most optimistic, 51 percent ranked themselves at 7 or greater.

These results are clearly more optimistic than Prime Advantage’s 2009 CFO Survey, in which 55 percent of CFOs said they were pessimistic about the economy, and 45 percent said they were pessimistic about the financial prospects for their own companies. Also, the 2010 Group CFO Survey shows that 64 percent of respondents believe the manufacturing economy will expand in 2010.

While industrial output has been on a steady climb, there are still signs that the recession and tight credit conditions will continue to impact growth in 2010, as 91 percent of respondents said their customers and prospects have been affected by the cost or availability of credit.

In another sign of a sluggish recovery, 57 percent reported that domestic employment in their factories will not return to year end 2007 levels before 2011 or 2012. However, when asked whether they would hire new staff to meet an increased demand in 2010, 82 percent responded affirmatively.

Hangover cures

Some popular ways of overcoming the recession hangover and improving liquidity are to keep reducing inventory levels (79 percent), followed by working to improve purchasing and sourcing efficiency (52 percent) and implementing asset and inventory optimization plans (48 percent). Although members took a variety of actions in 2009 to face the recession’s challenges, the majority (56 percent) believe these actions will not reduce their companies’ long term growth prospects. Yet, 22 percent believe that cuts in marketing and advertising spending could limit future growth.

In addition, 70 percent said they would continue to focus on cutting operational costs as their top corporate priority. Fifty-five percent said their organizations were focusing on developing new products and services in response to changing consumption patterns, while 52 percent said it was a priority to both respond quickly to future economic changes and to find new markets for products and services in response to the recession.

Uncertainty about customer demand was the top external concern among 61 percent of respondents, down from 76 percent in 2009. Concern over price pressures (28 percent) and federal government policies (19 percent) were the other two greatest external concerns.

Price pressures from competition and weak consumer demand were the greatest concerns in the latest Duke University/CFO magazine survey. And while the Prime Advantage member CFOs said that the federal government’s agenda and policies were among their top three external concerns, 73 percent agreed that the actions taken by the Federal Reserve helped the economy.

The CFOs also offered their perspectives on top internal concerns, with 28 ...