Minnesota factory leaders are boldly confident about the financial strength of their companies in 2016, even as they acknowledge concerns about a possible recession in 2018.
Those are the biggest takeaways from the annual State of Manufacturing Report issued by factory consulting organization Enterprise Minnesota with the help of survey pollster Meeting Street Research.
The survey found that 90 percent of 400 surveyed Minnesota factory executives were confident about the financial future of their companies. It was the highest level in the survey's history and the third year that confidence climbed. The survey, however, also revealed that the executives' confidence in the U.S. economy was the lowest since 2012.
Along with the survey, Enterprise Minnesota conducted 19 focus groups with factory owners and executives from across the state, most from companies with more than $1 million in revenue and more than 50 employees.
"Minnesota's manufacturers are enthusiastic about their prospects in 2016," said Enterprise Minnesota CEO Bob Kill. "The lessons they learned during the recession have made them strongly resilient and well prepared to face the growing sense of economic uncertainty."
The survey was conducted in February and results were to be formally revealed late Tuesday at the Minneapolis Convention Center before 400 business owners, bankers and economic development specialists, as well as U.S. Sen. Amy Klobuchar and U.S. Rep. Tom Emmer. The State of Manufacturing findings will also be presented to business leaders in 16 cities around the state during this month.
During the Great Recession, many firms laid off staff, automated some processes and squeezed out inefficiencies. Since then, many plants have grown again and now struggle to find enough workers to keep up with demand. A majority of survey respondents said that profits rose last year even as sales remained flat. Nearly 60 percent increased wages.
The factories also bought new equipment, created worker training programs and developed much closer ties with local trade schools in an effort to build a ready pipeline of job applicants.
Dunwoody College of Technology in Minneapolis will soon graduate 30 students with advanced machining degrees. All students received offers for full employment months ago, which is a change from how manufacturers used to operate with the school, Kill said.
With salaries and other costs rising in China and other developing countries, companies reported confidence that more customers are again looking more at the United States as a manufacturing site instead of having parts produced in China, Taiwan, Indonesia and Mexico. Enterprise Minnesota consultants said their small and midsize manufacturing clients reported that orders rose because customers sought better delivery time, product quality and cost controls than could be obtained overseas.
While confidence remains upbeat, the state of manufacturing results showed that not all of the state's manufacturers are worry-free.
The number of Minnesota manufacturers who believe the U.S. is headed into recession doubled to 15 percent this year. Another 48 percent said they expected the U.S. economy to remain flat. Only 32 percent believe American factories are headed into a year of economic expansion.
Concerns include the downturns in the U.S. oil/gas, ag equipment and mining sectors, as well as severe economic slowdowns affecting industrial trading partners from China to South America and parts of Europe.
Separately, half of surveyed factory leaders said they are still concerned about the high cost of health care and government regulations, but much less so than five years ago. About 32 percent worried that their factories won't be able to find enough workers to run their plants.
Baby boomers are retiring at alarming rates and not enough young students and professionals are filling the pipeline. At the same time, unemployment rates have dropped to 2 or 3 percent in some communities, making recruiting new workers hard.
The level of investment in training and retaining workers that manufacturers are showing is a new development, Kill said.
"Companies are being more diligent about the things they can control," he said. "Today, the talent development aspect of their business is more important for many of these firms. A lot of manufacturers thought they only had to have a strategy of continuous improvement [for their production processes]. But now they are integrating the people part of it into that."