Manufacturers are starting 2018 on the right foot and the outlook for the year is bright.
“Manufacturers right now are pretty upbeat,” said Chad Moutray, National Association of Manufacturers (NAM) chief economist. “The global economy looks good, things have turned in the right direction.”
Just how optimistic are manufacturers? Moutray reported that a recent survey conducted by the advocacy group found that 94.6% of NAM’s members said they were positive about their company’s outlook.
“When I meet manufacturers, they talk about sales—some of the best numbers they’ve seen in years. The labor market is tightening. Manufacturing hiring is up,” he said. “The No. 1 issue amongst our members is workforce, the ability to attract and retain a quality workforce. It even beats healthcare costs and other things our members complain about. That is a sign of strength.”
Here are three takeaways from Moutray’s 2018 economic forecast.
Manufacturers are investing in their businesses in 2018. Approximately 3.4% growth is expected for capital spending this year, Moutray reported. “The best we’ve seen in a number of years,” he added.
Part of the spending is investment in new employees and “upskilling” the existing workforce. “We need to do more to make sure that the skills manufacturers are looking for are being offered at schools,” Moutray said.
When companies have trouble finding talent, the workload is added to the plates of current employees. “Two-thirds of our members say they are working their existing workforce more. They are trying to find ways they can upskill them to be able to do those new jobs. So, that is a big issue,” he said.
The U.S. dollar
One of the big story lines of 2017 was how the U.S. dollar remained strong—about 16 percent higher than it was in the middle of 2014. However, Moutray pointed out that it actually fell 8 percent in 2017, which helped the overall export picture for manufacturers.
Moutray expects the dollar will weaken further in 2018.
“A large part of why that’s the view is even though the fed will be raising interest rates, I think the rest of the world also is going to be normalizing to use that central bank rate,” he said.
The U.S. saw 3 percent growth in GDP in the second and third quarters, and Moutray believes there’s enough momentum to keep it going.
“I think the fourth quarter numbers we get at the end of January will be at least 3 percent as well,” he said, adding that it could go upward to 3.5%.
“When you look at the overall forecast for this year, I have 2.8% growth for GDP for 2018. I think there’s upward potential there. I think we could hit the 3-handle for the first time since 2005 if things continue to move in the right direction,” he said.