Most small and midsized manufacturers expect continued economic growth for U.S. manufacturing through the end of 2011, according to a report by Prime Advantage, a buying consortium for midsized manufacturers. These findings are part of the Prime Advantage Group Outlook (GO) Survey, which says 40 percent of survey respondents are expecting revenue increases over the last half of 2011.

The leading drivers of growth include new product lines and overall growth in customer demand. Respondents are more positive this year than in August 2010, when 36 percent of respondents expected revenues to increase in the next six months. Another 47 percent believe that revenues will remain the same for the rest of the year, on par with August 2010, where 45 percent felt revenues would remain the same. Just 13 percent said they predicted revenues would fall in the last half of 2011, with anticipated slowdown in specific markets and overall customer demand listed as main reasons for the decline. This number shows improved sentiment when compared to August 2010, when 18 percent anticipated revenues to decline.

“Very positive to see that the optimism from earlier in the year is carrying through for the balance of 2011,” said Louise O’Sullivan, founder and CEO of Prime Advantage, in a prepared statement. “We’re pleased to see solid growth projections for our members in key areas such as revenue, employment, and capital expenditures.”

Highlights of Survey Findings
• Forty percent said they expected to see increased revenues for the second half of 2011
• Nearly one-quarter of the small and midsized manufacturing professionals who took the survey reported that their companies expect capital spending increases in the second half of 2011, while 55 percent said their capital expenditures would remain about the same as the first half of 2011
• Thirty-six percent said they were planning new hires in the second half of 2011, and 52 percent said their staff levels would remain steady through the end of the year
• Nearly one-third of all survey respondents said that their business was negatively impacted by the earthquake and tsunami that hit Japan in April. Other events, including unrest in Libya and damage from violent storms, forced respondents to find alternative sources and work to control logistics cost increases

Capital Spending More Careful

Seventy-nine percent of those surveyed stated capital spending such as new purchases of property or equipment, would stay equal to February projections or increase, with 54 percent staying equal and 24 percent seeing an increase. Another 21 percent said they would decrease their spending as compared to the first half of 2011, on par with August 2010 (20 percent).

Employment Outlook More Conservative

Eighty-eight percent of the respondents surveyed expect employment levels to either match February projections or increase, with 51 percent staying equal to and 36 percent expecting to increase employment in the second half. These numbers show a slight increase over the expectations from August 2010 (when 32 percent expected more hiring), but the results of the June RSM McGladrey survey reflected slightly more optimism, with the majority of respondents expecting an increase in hiring.

Respondents to the survey also expect a slight increase in layoffs from the beginning of this year (11 percent of surveyed companies compared to just 3 percent earlier this year, and 6 percent in August 2010). Prime Advantage notes that this result is far from the levels of January 2010, when 20 percent of companies expected layoffs.

Top Cost Pressures
The top cost pressures that most concern mid-sized manufacturing companies over the next six months include the cost of raw materials (82 percent), followed by the cost of base materials for components (72 percent). Logistics and healthcare nearly tied as the third highest cost pressure concern (43 percent and 40 percent, respectively).

Raw materials and components (such as metals and plastics) have appeared as the top cost pressure in every Group Outlook survey conducted since June 2008, says Prime Advantage. However, this survey’s results suggest the situation is improving slightly over the January 2011 results, when 96 percent of respondents including it as a top-three concern.

Supply Chain Focus Issues
When asked to rank supply chain focus points for the remainder of 2011, 81 percent said that cost containment and reduction was the top issue, followed by the need to reduce inventory levels (59 percent), managing and reducing supply chain risks (45 percent) and eliminating inefficient processes (44 percent).

Work Culture Changes with Younger Employees

Almost half of all respondents indicated they feel noticeable differences between generations. The following areas were the top three most frequently cited differences:
1. Expectations for having ideas heard and used
2. Willingness to challenge authority/status quo
3. Comfort mixing aspects of personal life and business life

To request a copy of the Prime Advantage 2011 2H Group Outlook Survey, visit www.primeadvantage.com/groupoutlook/.