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U.S. Manufacturing Could See Rising Profit in 2017

April 25, 2017

Though the skilled labor shortage and increased technology costs continue to be challenges for manufacturers, the outlook is generally positive for the industry in 2017.

The outlook is good for U.S. manufacturing for 2017. Industry experts say that manufacturing, perhaps more than any other industry, has been in a continual state of transformation for many years now. Though industry professionals have made a concerted effort to remain focused on profit margins and revenue growth, businesses must manage constantly evolving customer needs and a shifting competitor landscape, too.

Fast facts (Bureau of Labor Statistics)

  • For every $1 spent in manufacturing, another $1.81 is added to the economy.
  • As of October 2016, there were 12.3 million industry workers, about 9% of the U.S. workforce.
  • The gross domestic product is the most critical indicator of a healthy economy, and the GDP growth rate is expected to remain between 2 and 3 percent this year (the ideal range).
  • Unemployment is projected to continue at what is considered its “natural rate” of between 4.7 and 5.8 percent.
  • President Trump has proposed an increase in economic growth by 4 percent—which some feel is too fast of a pace (could promote ‘unsustainable investor behavior enthusiasm that drives asset prices up to levels that aren’t supported by fundamentals’).
  • Production will grow three percent in 2017.
  • March marked the sixth straight month of production growth.

What has caused this growth?

  • More appropriate levels of inventories;
  • A recovery in global markets;
  • Stronger corporate spending on equipment.

Challenges for 2017

Hiring- Manufacturers have had to cope with a lack of skilled workers, increased healthcare costs and pressure for increased wages.

Keeping up with technology- Big data, cyber security, and the Internet of Things, are just some of the trends and challenges that should be on manufacturers’ radars—and these are big, and often expensive changes.

Top priorities for manufacturers in 2017

Cutting Operational Costs- In order to upgrade assets and buy new tools to keep up with competition, manufacturers rely on operating costs—but they add up. Deliberate and careful planning is essential and manufacturers should look to create a purchasing timeline to help order investments by priority and take advantage of available credits and deductions. For example, Section 179 allows companies to expense up to $500,000 on new, used, purchased, or financed equipment. There’s also cost segregation studies, bonus depreciation, and many state or local credit or deduction programs, too.

Research and Development- Investing in R&D makes a business more productive and innovative and is invaluable to manufacturers’ success.

Apprenticeships- Increasingly, manufacturers’ answer to the hiring crisis is to form relationships with community colleges, technical high schools and vocational institutes, and initiate apprenticeships. Updating benefits packages will also make businesses more appealing to potential employees.

Utilizing data and technology- It is critical to utilize the latest in technological innovations. Maintaining data accuracy is most important for manufacturers’ ability to make strategic decisions when it comes to inventory, operations, the supply chain, customer data, asset management and financial recordkeeping.

A healthy manufacturing industry is essential to a thriving U.S. economy, and the outlook for the next eight months of 2017 is largely positive. Manufacturers will need to continue utilizing the latest technology and hiring strategies to make the most of business this year.

Contact our Manufacturing Services Team for further guidance.

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