NAM Survey Shows Growth For Small Manufacturers

Nov. 28, 2006
A National Association of Manufacturers’ 2006 Small Manufacturers Operating Survey showed respondents anticipate solid growth in the months ahead from strong sales and increases in exports and capital investment

A National Association of Manufacturers’ 2006 Small Manufacturers Operating Survey showed respondents anticipate solid growth in the months ahead from strong sales and increases in exports and capital investment. Yet hopes were tempered by rising health care costs, taxes and legal fees.

“This is a sweet and sour mix of information,” said David Huether, the NAM’s chief economist. “While the overall economy is downshifting due to housing, the survey shows this has not yet significantly affected manufacturers.”

Well over half of respondents, or 63%, expect their sales to grow more than 5% this year. “This is the second most optimistic response in a decade and more positive than the expectations of sales growth in the later half of the 1990s,” Huether said.

An improved focus on foreign markets is a highlight of this survey. More than one in 10 (10.7%) of the survey respondents say that exports account for at least a quarter of their company’s sales. This is an improvement from 2001 when less than 4% of survey respondents got a quarter of their sales from exports. “This shows the benefits that come from a lower dollar and solid growth abroad,” he said.

Similarly, 41% of survey respondents expect they will increase capital investment in 2006 by more than 5%. “These are positive figures that point to increased capital spending and job growth,” Huether said. “This is the most optimistic outlook in eight years.”

Dampening these positive figures is the news of rising health care costs. “According to the study, health care costs are one of the most serious problems for our members,” said Jeri Gillespie, the NAM’s director of human resource policy. Nearly half of respondents said their health care costs have risen from 11 to 20% in the past year. “They expect to cover these rising costs by asking employees to kick in more of their own money or by changing to a defined contribution or Health Savings Account (HSA) approach,” she said.

“Legal fees, such as spending on death tax planning, continue to pose an unfair burden on small manufacturers,” said Bob Shepler, the NAM’s director of corporate finance and tax. “Congress’s inability to permanently repeal this onerous tax costs small manufacturers over $94,000 a year. This is money that cannot be used for capital investment, research and development, or hiring.”

Even more costly, are the increasing legal fees to fight the frivolous lawsuits brought against nearly half of the manufacturers surveyed. “These cases cost small manufacturers an average of $195,000 a year,” said Larry Fineran, the NAM’s vice president of legal reform policy. “They consume money and time while addressing unreasonable requests and saddling manufacturer’s with unfair legal burdens.”

NAM’s 2006 Small Manufacturers Operating Survey is available at: http://www.nam.org/2006operatingsurvey