Economic outlook improves dramatically for Minnesota's manufacturers

Minnesota’s manufacturers are noticeably more optimistic about the economy than last year, according to the State of Manufacturing, a major survey research project sponsored by Enterprise Minnesota and partners.  

More than a quarter of manufacturing executives (26 percent) anticipate economic expansion in 2010 and only 19 percent foresee a continued recession. Compared to a year ago, that represents an 18 percent jump in executives predicting growth and a 37 percent decline in those who project a continued recession. Forty-four percent expect their firm’s annual gross revenues to increase in 2010, up significantly from only 23 percent last year.

The full results of the State of Manufacturing were revealed at a series of briefings this week with manufacturers, business leaders and policymakers throughout Minnesota.

Public Opinion Strategies (POS) conducted phone interviews with 500 manufacturing executives, representing a geographically proportional cross section of Minnesota, over two weeks in January. The poll has an error rate of /- 4 percent. The research was complemented by 13 focus groups of manufacturing executives conducted throughout Minnesota.

Statewide sponsors for the State of Manufacturing include the Center for Rural Policy and Development, Granite Equity Partners, LarsonAllen LLP, and RJF Agencies. Regional sponsors include the Blandin Foundation, Iron Range Resources and the Southwest Initiative Foundation.

“Manufacturers faced a tough year in 2009, but we’re seeing optimistic attitudes again in 2010,” said Enterprise Minnesota president and CEO Bob Kill. “Many manufacturers might say that this recession has made them better. It’s focused their business, changed how they operate, and drove them to innovation. They’ve seen the worst, worked their way through it, and are on better footing today to drive business growth and ultimately job growth throughout the state.”

A looming cloud on the prospects for manufacturing appears to be the mounting concerns over further decreasing availability of credit. The percentage of firms who say they experienced a constriction of credit has increased threefold since last year’s survey from 13 percent to 37 percent. Twenty-nine percent of executive say that credit constriction has had a significant impact on their business, compared to just nine percent reporting the same last year.

Other findings:

• State’s business climate needs to improve: Manufacturing executives believe that more can be done at the state level to make Minnesota a more competitive business location. Fifty-four percent believe that the state is on the wrong track, identical to results in last year’s survey when 55 percent of executives expressed the same sentiment.
• Health care costs a top concern: Health care costs are top of mind again, as more than two-thirds (68 percent) of executives list health care costs as the highest concern, slightly higher than last year (64 percent). Under the stress of rising costs, the number of executives that say their company offers some variety of health care plan dropped 11 percent.
• Different shades of green: Exactly half of survey respondents say that environmentally-friendly practices are important to their business but they are skeptical that it adds value for their employees (24 percent) or customers (26 percent). Fifty-four percent of executives say that the most important reason to go green is for their business to do its part protecting the environment, while government incentives ranked very low (3 percent).
• Some expect wage increases: With the economic downturn flattening, 45 percent of manufacturers expect wages to increase over the next two years; 27 percent of those who expect the recession to last through 2010 project wages will increase during that period.