Manufacturers Feeling The Impacts Of Inflation And Supply Chain Challenges
Randy Wolken, President & CEO
Economic headwinds are being felt by New York State (NYS) manufacturers and throughout the U.S. The Empire State Manufacturing Survey conducted by the Federal Reserve Bank of Buffalo bears this out. Also, the 3rd Quarter Manufacturers’ Outlook Survey from the National Association of Manufacturers (NAM) shows a similar impact. The findings of these two important surveys are worth exploring.
September’s Empire State Manufacturing Survey did see a bounce back in the overall General Business Index. It rose 30 points from last month. Also, forward-looking indicators recovered and showed a more positive outlook for the six months ahead. Although, it seems that many manufacturers now expect a softening in the economy in the future. This stands in contrast to what I had previously been hearing from many manufacturers until recently.
As for NAM’s 3rd Quarter Manufacturers’ Outlook Survey, conducted from August 16–30, 2022, manufacturers’ overall optimism has faded to its lowest level since the 4th Quarter of 2020. Key findings include:
- 78.3% of manufacturing leaders listed supply chain disruptions as a primary business challenge, with only 10.8% believing improvement will occur by the end of the year.
- Attracting and retaining a quality workforce (76.1%), increased raw material costs (76.1%), and transportation and logistics costs (65.9%) were not far behind supply chain challenges as the most significant problems faced by manufacturers.
- Over three-quarters of manufacturers felt that rising material costs were a top business challenge (tied with workforce challenges and slightly below supply chain worries), and 40.4% said that inflationary pressures were worse today than six months ago. In addition, 53.7% noted that higher prices made it harder to compete and remain profitable.
- The top sources of inflation were increased raw material prices (95.2%), freight and transportation costs (85.4%), wages and salaries (81.7%), energy costs (54.4%), and health care and other benefits costs (49.0%), with 21% also citing the war in Ukraine and global instability.
- When asked what aspects of the CHIPS and Science Act were most important for supporting manufacturing activity, 69.6% of respondents cited strengthening U.S. leadership in energy innovation and competitiveness.
These surveys suggest that the next year will be more challenging for manufacturing than the last couple of years which saw a rapid return to growth after the early stages of the pandemic. Inflation and supply chain challenges lead the way with respect to concerns, while finding and retaining a workforce remains a crucial need. This tracks my conversations with our members throughout Upstate New York. MACNY is ready to help our members navigate this challenging period of time. Please let us know how we can help you. And, thanks for all you do for our community.