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VideoNational Association of Manufacturers Q1 2024 Survey: Manufacturers Continue to Navigate Tax and Regulatory Challenges
Insights from the National Association of Manufacturers (NAM) Q1 2024 Outlook Survey shed light on the prevailing sentiments and challenges within the sector. One of the highest concerns is the expiration of federal tax incentives, pertaining to research and development, interest deductions, and capital investments. This has provoked nearly 40% of respondents to scale back on hiring and investing, citing increased taxes as a deterrent.
Tax Policy and Regulatory Concerns
The survey underscores manufacturers’ apprehensions regarding forthcoming federal regulations, with nearly two-thirds of respondents expressing varied levels of concern about the associated costs of implementation. This uncertainty, colored with the looming expiration of tax incentives, has elevated concerns about the overall business climate to mirror levels last observed at the end of 2016.
Outlook and Key Findings
Despite the taxation and regulatory pressures, nearly 69% of respondents expressed varying degrees of positivity, from “somewhat” to “very” positive, about their company’s outlook, marking a slight increase from the previous quarter’s 66%. However, it is worth noting that this marks the sixth consecutive quarterly reading below the historical average of approximately 75%.
Key findings from the survey include:
- Nearly 94% of respondents emphasize the importance of federal tax code support in reducing manufacturers’ costs for R&D, capital access and CAPEX, with 58% deeming it “very important.”
- Over 72% of respondents highlight the impact of the current permitting reform process’s length and complexity on their investment decisions, with over a third indicating “moderate” to “extreme” impact. Manufacturers advocate for reform, believing it could facilitate increased hiring, business expansion, and improved wages and benefits.
- Workforce challenges remain a top concern as in previous surveys, with over 65% of manufacturers citing the inability to attract and retain talent as a primary challenge.
- Additional factors impacting manufacturing optimism include a business climate still widely regarded (by 59% of respondents) as “unfavorable,” rising healthcare and insurance costs (reported by 58% of respondents) and weakened domestic economy and sales for manufactured products (reported by 53% of respondents).
Other trends regarding predicted growth rates over the next twelve months include:
- Sales: Respondents expect sales to rise approximately 2%, up about a half percent from Q4 2023 and the strongest reading in the last four quarters.
- Production: Production is expected to increase in relative commensurate to the increase in sales, approximately 2%, up from 1.7% in Q4 2023 which was a high-water mark over the past four quarters.
- Employee Wages. Approximately 3% wage growth is expected.
- Inventories: Respondents expect inventory levels to reduce approximately 2%, a decline for the seventh consecutive fiscal quarter. This suggests that manufacturers are continuing to reduce inventory that was (in part) stockpiled during the supply chain issues during, and coming out of, the COVID-19 pandemic.
The Q1 2024 survey results paint a consistent picture of the landscape, reflecting simultaneous optimism and levels of concern among manufacturers. While many remain positive about their company’s outlook, challenges stemming from tax and regulatory policy pressures coupled with workforce shortages continue to loom large.
The Q1 2024 NAM survey was conducted in February 2024 among 300 respondents.
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Authored by Chris Boyd, CPA
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