Manufacturing Outlook Survey Indicates Continuing Uncertainty

While manufacturing companies and wholesale distributors of all sizes are employing a number of different strategies in the face of economic uncertainty, many may not be addressing more concrete strategies that could help as the economy picks up.

According to Manufacturing Outlook: Findings of a National Survey of the Manufacturing and Distribution Industries, a survey conducted by Clifton Gunderson, most industry executives are holding off on capital expenditures amid uncertain economic times. Of the more than 200 manufacturing, metal fabrication, distribution, industrial and commercial machinery, agriculture supply/production, and food and beverage companies surveyed for the Manufacturing Outlook:

•    74 percent of respondents said they are concerned about overall economic uncertainty
•    48 percent of survey respondents said they are delaying hiring additional staff
•    44 percent are experiencing flat or declining sales.
•    63 percent of smaller businesses said they are delaying major business initiatives

While manufacturing companies and wholesale distributors of all sizes are employing a number of different strategies to stay in the game, the Manufacturing Outlook found five key areas that CEOs are focusing on for the future: increased domestic sales (51 percent), operational efficiencies (34 percent), cost cutting (24 percent), new product mixes (18 percent), and mergers and acquisitions (17 percent). Customer relationships and customer needs are foremost in the minds of smaller companies as they try to grow domestic sales.

Interestingly, many companies may not be addressing more concrete strategies that could help them thrive and grow as the economy picks up. First, exporting may be a key factor for companies that want to improve profits and create a buffer against uncertain U.S. sales. Large U.S. manufacturers are experiencing increases in profits from exporting, yet 49 percent of companies surveyed by the Manufacturing Outlook say they do not export and have no plans to export. Public incentives, private capital and overseas demand all contribute to whether exporting makes a good bet for specific industries and companies. These three factors should be considered in new strategies to leverage exporting opportunities.  

In addition to evaluating additional North American and overseas opportunities, CEOs should be taking a good look at financial strategies that involve cost segregation, fixed asset reviews, research and development credits, and energy-related incentives. Like finding money in your own bank account, these tactics can significantly reduce tax burdens and increase cash flow. Considering that 44 percent of companies surveyed for the Manufacturing Outlook are concerned about new taxes, it’s in CEOs’ interest to streamline tax strategies now and be prepared for future changes currently under consideration by federal, state and local governments.

James J. Andreucci, JD, is a tax partner at Clifton Gunderson LLP, primarily focusing on manufacturing, retail and distribution companies. He also serves as the firm’s Manufacturing Niche Team Leader. For a copy of the Manufacturing Outlook survey, please contact Marketing Director Becky Bauer, becky@cliftoncpa.com.

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