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Worst might be over for manufacturing sector

Editor's note: The following article appeared in Enterprise Minnesota.

One year after the global economy buckled, Minnesota manufacturers are saying that the worst might finally be over for their industry.

Mid-year focus groups for the State of Manufacturing, a research project sponsored by Enterprise Minnesota, revealed that manufacturing executives expect the economy to start slowly recovering.

"Most focus group participants indicated that the economy appears to have hit bottom," said Tom Mason of Minneapolis-based Mason Public Affairs, Inc., which conducted nine focus groups in August and September throughout Minnesota.

Last year, Enterprise Minnesota initiated the State of Manufacturing, a 400-person survey conducted in December 2008 by Public Opinion Strategies, a survey research company based in Alexandria, Virginia.

In the December survey, Minnesota's manufacturers surprised many observers with a universally calm, "We've been through this before" attitude in response to the sudden, dramatic decline in the American economy.

Over the past 12 months since that decline, some manufacturers have coped with the economic slowdown by cutting back overtime, shortening the workweek to four days, and laying off employees where necessary. Those measures helped companies hold steady over a slower than normal summer, but executives say that there are new signs of life on the horizon.

"We are starting to see a little bit of pressure right now in the pricing," said a focus group participant in St. Cloud. "We didn't see that last fall but it is starting to show up right now. That is usually an indication that you are near the bottom."

"It will probably take two years but I think we are already starting to climb out of it gradually and maybe being flat for a while is actually climbing out of it," said another participant at a focus group in Elk River.

That feeling of cautious optimism is national, too. A recent survey by Prime Advantage, a buying consortium for midsized manufacturers, found that 80 percent of respondents indicated that they expected revenue for the second half of 2009 to either stay the same or increase. The same survey in February found that only 38 percent were predicting revenues to either stay the same as 2008 or increase.

"Small and midsized industrial manufacturers across many sectors are seeing new orders materialize after many months of slow activity," said Louise O'Sullivan, president and founder of Prime Advantage. "These results indicate that the recovery is starting to gain traction across a broad spectrum of our economy and that new orders are coming in."

Back in Minnesota, while focus group participants expressed hope that they are indeed gaining traction, they had hesitance that the future holds anything but a slow climb back up.

"If you have a broken leg, you recover from it, but it's still going to take you rehab for a year to really get back to full speed," quipped a participant in the Elk River focus group.

For more information on the State of Manufacturing, or to read the full focus group transcripts, visit www.enterpriseminnesota

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