State of manufacturing report is best in 5 years

Recent gains in sales, exports and the return of production to the United States have boosted the confidence of Minnesota manufacturers to the highest level in five years, according to findings released Thursday from Enterprise Minnesota.

Its sixth annual State of Manufacturing report detailed responses from 400 executive surveys and 14 focus groups from around the state. The consulting firm found that Minnesota factory managers are the most upbeat since the recession-gripped days of 2009.

"Overall, 84 percent of executives say they are confident about the future of their firms," said Enterprise Minnesota CEO Bob Kill during an interview with the Star Tribune.

Kill and state officials shared the news with 400 manufacturers, college officials and state economic development leaders Thursday at the Minneapolis Convention Center. Report authors also will hit the road and hold industry briefings about the findings through June 13. The briefings are scheduled at Eveleth, Grand Rapids, Brainerd, St. Cloud, Alexandria, Mankato, Albert Lea, Winona, Red Wing, Owatonna, Rochester, Elk River, Litchfield and Fergus Falls.

This year's report echoes the findings of recent employment and production reports issued by the Institute of Supply Managers and Creighton University. Those surveys, released last week, signaled that the manufacturing sector across the U.S. and Midwest continues to grow and could be experiencing its strongest recovery in years.

There were positive surprises in Thursday's Enterprise Minnesota report. Many Minnesota factory executives said they plan to raise wages for the first time since the Great Recession. "And we also see a slight uptick in expected gross revenues and profitability for 2014," said Rob Autry, the Public Opinion Strategies pollster who conducted the surveys and focus groups for Enterprise Minnesota.

Part of the sales increase was credited to the return of manufacturing to the United States. Officials from Alliant Castings in Winona and from the Eden Prairie-based 3-D printing firm Stratasys, told Enterprise Minnesota that product orders recently grew because customers abandoned overseas contract suppliers for Minnesota firms' quick-turn work that slashed shipping costs and delivery schedules. Alliant, in particular, is seeing is business come back from Italy and Germany.

That theme was pervasive this year, Kill said. "Some 24 percent of our respondents said they have experienced it and gained new business from reshoring. Last year it was less than 20 percent. And here's an interesting statistic: This year, 34 percent of companies with $5 million or more in revenues experienced reshoring. So this is a big opportunity."

Generally, the Enterprise Minnesota survey found that larger firms were more upbeat about a range of factors.

However, the survey also found that the number of "very confident" factory executives rose to 36 percent from 28 percent a year ago, regardless of company size. And only 7 percent of survey respondents said they worried about a U.S. recession, compared to 15 percent a year ago and "the lowest number the survey has ever recorded," Kill said.

While the report signifies a better mood among Minnesota producers, it didn't find complete satisfaction. About 54 percent of those surveyed expect the U.S. economy to be flat this year while just 37 percent expected nationwide growth.

Separately, 59 percent of survey respondents listed health care costs as their "top concern."

Interestingly, factory managers were not the only ones fretting. Surveyed managers shared tales of recent job candidates who were more intrigued by their company's offer of health insurance than salary. As a result, "health care is now the dominant factor in recruiting [and retaining] the best talent over salary and wage by almost 20 percentage points," the report said.

While most firms said they planned to hire and raise wages this year, two-thirds complained that they still struggle to find enough skilled workers to run automated, robotic and high-tech manufacturing equipment. The shortage "continues to grow," especially in outstate Minnesota, 75 percent of responding plant managers said. Engineers, welders and drafters are among the toughest workers to find.

Dee DePass • 612-673-7725