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National Association of Manufacturers Q4 2023 Survey: Outlook Improves but Remains Near Post-Pandemic Low

The NAM survey conducted in November 2023 covers key trends and economic outlook among manufacturers. Learn more.
3 minute read
January 25, 2024

The number of manufacturing companies with a positive outlook rose slightly in the fourth quarter, according to the National Association of Manufacturers (NAM) Fourth Quarter 2023 Outlook Survey. The survey indicated a marginal upturn in sentiment, with 66.2% of respondents expressing varying degrees of positivity, a modest increase from the preceding quarter’s 65.1%. The varying levels of optimism became more apparent among companies of different sizes. Large manufacturers, carrying more than 500 employees, displayed a robust rise in positivity, reaching the highest level since Q2 2022 at 77.5% of respondents reporting positive outlooks. Conversely, small (<50 employees) and medium-sized (50-500 employees) firms expressed more measured responses, with 65.9% and 63.0% reporting positive outlooks, respectively.

Workforce Challenges

Concerns about an impending recession in 2024 witnessed a notable reduction, with 34% of manufacturers anticipating an economic downturn, down from 42.2% in the third quarter. Despite this positive shift, a notable portion (40.7%) remained uncertain about the U.S. economy’s trajectory in the coming year. Also, the manufacturing sector grappled with persistent workforce challenges, as more than 71% of respondents identified the inability to attract and retain employees as the primary challenge. Additional concerns included political dysfunction, an unfavorable business climate (at the highest reported level of concern in seven years), and rising healthcare and insurance costs.

International sales and entering new markets are a key part of future growth strategies according to survey results, with over 84% of respondents stating that growth in exports to foreign markets was important to their success, and more than 52% suggesting foreign markets were somewhat or very important for their company.

Taxation and Regulatory Burden

Tax burdens and the regulatory environment continued to be significant focal points, which is consistent with recent survey results from previous quarters. A significant majority (89%) of respondents expressed a concern that increased tax and regulatory burdens on manufacturing activities would hinder workforce expansion and facility growth. The importance of permitting reform was evident, with two-thirds of participants expressing its impact on investment decisions.

Political dysfunction emerged as a major concern, with nearly 8 out of 10 respondents (77.6%) highlighting it as a significant issue. This was followed by other concerns about geopolitical turmoil (67.7%), economic recession (66.8%), and the impact of rising interest rates and the U.S. dollar (61.2%).

Critical Minerals

Approximately 80% of respondents indicated that their operations would be affected in some capacity if other countries decided to limit or decrease the supply of critical minerals to manufacturers in the U.S. Critical minerals are fundamental to manufacturers and are the building block for modern technology. This is significant given that export restrictions on critical minerals have seen a significant increase from other countries in recent years.

Sales, Production, and Employee Wages

Other key trends reported from manufacturers regarding predicted growth rates over the next twelve months include:

The Q4 NAM survey was conducted in November 2023 among 234 respondents.

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Authored by Chris Boyd, CPA