Article
Brochure
Insight Hub
Executive Resource
Ext. Publication
VideoDomestic Economy Concerns in Q3 Manufacturing Industry Survey
The National Association of Manufacturers (NAM) recently conducted its Q3 2024 Manufacturers’ Outlook Survey which revealed insights from executives into the current state of the manufacturing industry. The survey was conducted in September among 294 respondents.
According to survey results, a weaker domestic economy was listed as the top concern among manufacturers, followed by increases in health care costs and an overall unfavorable business climate. Attracting and retaining talent was listed fourth, and it has been listed as a top challenge in each survey since Q4 2017. Manufacturer pressure continues to prevent Congress from increasing taxes, as nearly 90% of respondents agreed that Congress should act to prevent scheduled increases on manufacturers before the end of 2025.
Outlook on Manufacturing
Approximately 63% of respondents felt positive about their Company’s outlook in Q3, falling from 42% in Q2 and below the trailing four-quarter average of 67%.
Although the majority of respondents still express optimism, this quarter marked the eighth consecutive reading below the moving average reading among executives for positive sentiment, as well as the lowest reading since Q2 2020 at the height of the COVID-19 pandemic.
Persistent Workforce Challenges
Workforce challenges continue to dominate the manufacturing industry. Approximately 60% of manufacturers cited the inability to attract and retain employees as their primary challenge. Additionally, there is a focus on rising health care costs, with 63% of respondents citing this as a primary challenge.
As noted in the Q2 survey, with the trend continuing in Q3 — while workforce challenges remain a major concern — the percentage of manufacturers considering it their primary concern has been gradually decreasing since the peak in Q4 2021. Conversely, concerns over rising health care costs have been steadily increasing over the past two years.
The Industry Impact of Tax Policy
Scheduled tax changes remain a major concern for manufacturers, and many of them are advocating Congress to extend or modify provisions critical to the industry’s growth, and competitiveness.
Manufacturers face significant challenges as key tax provisions are set to expire or become less favorable. The amortization of R&D expenses over five years, stricter interest deductibility limits under Section 163(j) and the continued phase-out of 100% bonus depreciation by 2027 are reducing cash flow and investment incentives. Additionally, the sunsetting of the 20% Qualified Business Income deduction (Section 199A) and reduced individual tax rates after 2025 could increase tax burdens for pass-through entities. Family-owned manufacturers are also concerned about estate and gift tax exemption reverting to pre-TCJA levels. These changes threaten cash flow, planning and competitiveness, prompting industry calls for legislative action.
Manufacturing executives contend that these scheduled increases will harm growth in the sector for United States companies, with 92% of respondents arguing that the corporate tax rate should remain at, or below, 21%. If the corporate rate is increased to 28%, more than 71% of respondents indicated this will have a negative impact on their business.
Health Care Costs for Manufacturing Workers
Over two-thirds of respondents (72%) support action by Congress to reduce health care costs by reforming pharmacy benefit managers (PBMs). According to survey respondents, PBMs have the effect of increasing costs at the expense of both manufacturers and workers themselves.
Election Impacts
It is very important to note that the survey results obtained for Q3 were based on responses in September 2024, prior to the final results of the election. It is anticipated that the election results could have an impact on the responses provided, and we expect to see that come through in Q4 2024 or Q1 2025 results.
In the meantime, Weaver’s professionals are proud to help manufacturing clients navigate these challenges with meaningful and strategic insights. For more information on how Weaver can help your business, contact us today.
Authored by Chris Boyd, CPA
©2024