Insights

According to official sources (National Association of Manufacturers and Institute for Supply Management), the manufacturing industry is generally growing. For 2011, overall growth was approximately 4% industry-wide. Production, sales and backlog all grew in 2011. While the fourth quarter did show some decline from the previous quarter, economists are predicting (European debt issues notwithstanding) cautious optimism and slow, but steady growth for 2012. Capacity utilization and employment also grew in 2011. This growth seems to be putting pressure on the supply chain — deliveries are slower and there is continued focus on keeping inventories low. Everyone is talking about the “new normal” — slow growth.

More importantly, most clients have confirmed the official reports — 2011 was better than 2010, the fourth quarter fell off a bit, but backlog is strong and pricing remains relatively stable. What do clients expect for 2012? An unofficial survey of several companies provided the following: 

• Expect to meet budgeted revenues/profits, but still not operate at maximum capacity
• Expect a modest increase in production labor to meet additional demands
• Expect some inflation in price of raw materials component parts
• Expect ability to shift additional costs to customers 

What’s next for 2012? Perhaps “insourcing” of manufacturing to the U.S.? That’s the President’s plan. What will actually happen depends on many factors — the upcoming election, European recession fears, pressure from China and Brazil, and even natural disasters. Stay tuned.

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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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