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The multiyear manufacturing expansion dating back to 2010 is expected to continue in 2014, according to a November survey of manufacturers conducted by the Federal Reserve Bank of Minneapolis and the Minnesota Department of Employment and Economic Development.
Manufacturers reported increased activity but decreased profits in 2013. Orders were up for 45 percent of survey respondents and down for 29 percent. Over a third reported increased employment, while 23 percent reported reduced staffing. Manufacturers also reported higher prices and productivity, but 38 percent experienced lower profits (31 percent reported higher profits). The largest shares of firms that reported growth in 2013 were in Wisconsin and North Dakota. A higher proportion of smaller firms reported growth in activity compared with large and medium-sized firms. Wages and benefits grew about 2.4 percent.
More manufacturers across the district expect growth in 2014 (see chart). Orders, total production and exports are expected to increase. Companies are expecting more capital investment, productivity and profits, as well as higher selling prices.
Almost a third of respondents expect manufacturing employment to grow in 2014, while 14 percent expect job cuts. Wages are expected to increase by 2.2 percent, while benefits are expected to increase by 2.5 percent. Based on numerous comments, the Affordable Care Act (ACA) may be affecting benefits costs and business decisions. Twelve percent of respondents indicated that their company plans to shift to more part-time workers over the next two years on top of the 13 percent who said they have already shifted as a result of the ACA.
This industry optimism spills into a positive outlook many have for their state economies. More respondents than not expect increases in state economic growth, employment, business investment and consumer spending. However, overall corporate profits are expected to be flat. Inflation is also a concern, as 56 expect higher inflation, while only 1 percent foresee lower inflation.
Manufacturing survey data [.xlsx]
