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Manufacturers confident but concerned about future

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news Alexandria, 56308
Echo Press
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Alexandria Minnesota 225 7th Ave E
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56308

With manufacturing providing the backbone of Douglas County's economy, it would be helpful to gaze into a crystal ball to see what the future will hold.

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Lacking that, there is another tool: a survey called "The State of Manufacturing."

Sponosred by Enterprise Minnesota and partners, the survey shows that manufacturers in the state are confident of their firms' futures but still have significant concerns about the economy.

One of their top worries is finding enough skilled and experienced workers.

And for the first time in the survey's five-year history, health care has tied with fiscal uncertainty in Washington as the top concerns among industry executives.

Overall, the mood among manufacturers remains positive about the future of their own companies, with 82 percent of executives reporting confidence.

This held true among enterprises of all sizes, locations and revenues and is identical to the 2012 data.

Despite the general optimism, manufacturers appear to be less economically hopeful than they have been in the past, with 15 percent of respondents expecting a recession this year.

That's the highest percentage in the last three years and a change from the notable optimism that emerged two years ago as the recession began to subside.

Executives are not overly optimistic about the revenue projections of their own companies, as only 41 percent believe they will see an increase in gross revenues this year, down from 47 percent in 2012.

Likewise, the majority of respondents do not foresee increases in profitability (68 percent) or capital expenditures (72 percent). These results closely reflect last year's numbers.

Health care challenges, uncertainty in Washington and finding qualified workers continues to negatively affect the manufacturing industry's business planning and forecasting abilities.

HEALTH CARE DOMINATES CONCERNS

For the fifth year in a row, health care remains a top concern among all manufacturing executives, with 68 percent identifying the issue this year compared to 67 percent in 2012.

Executives also noted the importance of health care for recruiting the best talent, with 54 percent listing it as "an important tool." This is a four-point increase from 2012 and a whopping 15-point increase from the first survey in 2008.

Also, in a new poll question introduced this year, 54 percent of executives said they expect their health care costs to increase "a lot" in the next two to three years and an additional 15 percent expect them to increase a little.

Despite nearly seven in 10 executives predicting higher health care costs, fewer are offering wellness programs, down from 34 percent in 2011 to 31 percent in 2012 to 30 percent in 2013.

BUDGET, TAXES

For the first time, budget and tax uncertainty is tied with health care as the top concern among manufacturing executives. Fully 67 percent of executives reported that budget and tax uncertainty in Washington is a problem for their firms.

The majority (78 percent) have little or no confidence that Congress and the president can reach an agreement or take action. This lack of certainty makes it very difficult for manufacturers to plan ahead, with 73 percent saying the uncertainty would have at least some impact. This response was 18 points higher among smaller firms in terms of employees and revenues than those that make more than $5 million in revenue.

WORKFORCE

CHALLENGES

In 2013, the survey found manufacturers' concern over the number of qualified workers as well as the ability to attract and retain those workers continue to grow.

This year, 60 percent said it was difficult to attract candidates, a marked increase from 40 percent in 2010. Perhaps surprisingly, larger firms were more apt to report this problem, with 71 percent noting it among companies with more than $5 million in revenue and 73 percent among firms with between $1 million and $5 million in revenue.

This challenge may partly be attributable to the types of applicants these employers are seeking, with 49 percent looking for candidates with both technical training and experience.

Despite the difficulty, most employers do not plan to spend more on developing employees. Only about 18 percent plan to increase their employee development spending, with the large majority (68 percent) reporting that there will be no change in investment. These numbers have remained remarkably consistent since the survey began.

Overall, manufacturers do not appear to be hiring as many employees as they were a year ago. Only 22 percent of manufacturers grew their workforce in the last 12 months, compared to 27 percent in 2012. The forecast of adding jobs in the future is also declining, with 25 percent expecting their company's workforce to grow in the next 12 months, a four point drop from 2012.

SHIFT IN GROWTH MARKETS

Fewer Minnesota manufacturers say they ship 11 percent or more of their product internationally, with about 14 percent reporting this in 2013 compared to 18 percent in 2012.

The top potential markets for growth have shifted, with Canada being named top market for future business (22 percent) and China in the number two spot (19 percent of the votes). This is a flop from last year, when China was voted the top market (22 percent) and Canada came in second (20 percent).

HOW THE SURVEY WAS DONE

Pollster Rob Autry from Washington, D.C.-based Public Opinion Strategies (POS) conducted phone interviews with 400 manufacturing executives, representing a geographically proportional cross-section of Minnesota, throughout the month of March.

The poll has an error rate of +/- 4.9 percent. The research was complemented by 20 focus groups of manufacturing executives from around the state.

Statewide sponsors for The State of Manufacturing include: Baker Tilly Virchow Krause, LLP; Granite Equity Partners; Gray Plant Mooty; BMO Harris Bank; RJF, a Marsh and McLennan Agency LLC Company; Trusight; and Doherty.

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Al Edenloff
Al Edenloff is the news and opinion page editor for the Echo Press. He was born in Alexandria and lived most of his childhood in Parkers Prairie. He graduated with honors from Moorhead State University with a degree in mass communications, print journalism. He interned at the Echo Press in the summer of 1983 and was hired a year later as a sports reporter. He also worked as a news reporter/photographer. Al is a four-time winner of the Minnesota Newspaper Association's Herman Roe Award, which honors excellence in editorial writing.  
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