NAM Q2 Outlook Survey Reports Record Optimism

95.1% of manufacturers report positive outlook in the wake of tax reform.

Well, we’re almost halfway through the year, which means it’s time for quarterly reports.

A particularly intriguing one comes from the National Association of Manufacturers (NAM), which just released the results of its Manufacturer’s Outlook Survey for Q2 2018. The biggest bombshell is the finding that 95.1 percent of all manufacturers—and 95.8 percent of medium-sized manufacturers—have a positive outlook for their companies. These are both all-time records in the survey’s 20-year history.

NAM credits these record-breaking results to the enactment of the Tax Cuts and Jobs Act passed by congress six months ago.

“Last year, manufacturers promised that we would deliver for our people and our communities if tax reform became law,” said Jay Timmons, NAM president and CEO. “Congress and the president delivered, and now manufacturers are keeping our promise: hiring new workers, raising wages, improving benefits, buying equipment and expanding right here in the United States. And the best part is, with manufacturers’ record-setting confidence and plans to keep hiring and growing, more good news is yet to come.”

(Image courtesy of NAM.)

(Image courtesy of NAM.)

One can’t help but notice the stark contrast of these sentiments to the recent string of tariffs announced and implemented by and against the United States. Whether or not you believe that Trump’s steel tariffs are stupid, their effects are already being felt in the construction industry, and the manufacturing sector seems likely to follow suit. So, why all this optimism in the NAM survey?

The responses were collected between May 22 and June 5, 2018, which includes the administration’s announcement that Canada, Mexico and the European Union would no longer be exempt from tariffs on aluminum and steel imports, but only just. It’s also worth noting that “Rising raw material costs for our products” became the second most common business challenge, overtaking “Rising health care/insurance costs” compared to the Q1 report, though still behind “Attracting and retaining and quality workforce.”

Primary Current Business Challenges, Q2 2018. (Image courtesy of NAM.)

Primary Current Business Challenges, Q2 2018. (Image courtesy of NAM.)

One other item of note: the word ‘tariff’ does not appear anywhere in the report.

Nevertheless, the survey results paint a rosy picture across the board. The expected growth rate for production over the next 12 months is up by 5.7 percent, up from 5.5 percent in March and the highest since the question was added to the survey three years ago. Even more impressive, the expected growth rate for employee wages is up 2.7 percent—the highest it’s been since 2001.

NAM Manufacturing Outlook Index, 2016-2018. (Image courtesy of NAM.)

NAM Manufacturing Outlook Index, 2016-2018. (Image courtesy of NAM.)

Conventional wisdom says no one wins in a trade war, and many additional tariffs have been announced since the survey results were collected. The next NAM survey will be released in September, so it will be interesting to see if the sentiment remains the same.

You can view the full NAM Manufacturers’ Outlook Survey for Q2 here.