2015 Outlook on Manufacturing

What is the outlook for manufacturing in 2015? Positive, according to the results of a survey cited by the Institute of Supply Management. In the survey, 67 percent of purchasing and supply executives representing a broad swathe of industries predict a 5.6 percent increase in overall 2015 revenues. The respondents also expect a 3.7 percent rise in capital expenditures.

These sentiments are echoed by the Bank of America Merrill Lynch 2015 CFO Outlook. According to the report, 68 percent of chief financial officers drawn from a broad range of manufacturing concerns expect increased sales, while 46 percent predict improved profits. The outlook for manufacturing in 2015 is so upbeat is that, according to the report, a significant number of companies expect to either expand existing operations or extend into new markets in Europe, Asia and Latin America.

Several factors are fueling these positive expectations in 2015. The rising cost of labor in formerly low-wage countries is one factor, explains Commodities Now. Labor costs in countries such as China and Mexico, once favored outsourcing destinations, have risen significantly over last few years. The high costs are not only drawing American manufacturing concerns back to the United States, but they are also encouraging them to hire or retain American workers.

Lower fuel costs is another factor underlying the positive outlook for manufacturing. According to Dan Miklovic, a principal analyst in asset performance management at LNS Research, the depressed cost of energy benefits manufacturers in two ways. First, decreasing prices of fuel and other energy sources are associated with a significant reduction in manufacturing costs. Secondly, the falling prices of energy translate into larger disposable incomes for consumers, causing an increased demand.

A report from PriceWaterhouseCoopers echoes these sentiments, predicting that a burgeoning shale gas recovery industry and low energy prices could result in up to a million manufacturing jobs in the United States every year until 2025. A report appearing on the December 2014 Semiannual Economic Forecast by Institute of Supply Management predicts that the employment base attributable to manufacturing will grow by 1.5 percent in 2015.

These rosy predictions are predicated on the expectation that energy prices will remain low for several years, warns Miklovic. According to the analyst, if energy prices rise, not only will manufacturing costs increase, but consumer demand may slacken. That is not the only risk. According to the Dayton Region Manufacturers Association, many manufacturers find high taxes and the convoluted tax code challenging. Another problem is the growing shortage of workers with technical skills. These problems continue muddying the otherwise excellent outlook for manufacturing, the association warns.

After years of decline, the outlook for manufacturing in the United States is largely positive. Some of the factors fueling positive expectations in 2015 among manufacturers include low fuel prices and rising labor costs in competing countries. However, a convoluted tax code, high taxes and a shortage of skilled workers remain a threat to growth.

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