Economic Fears Fade for Minnesota Manufacturers
Executives project dramatic increases in revenues, profits, and capital expenditures

February 22, 2011

Minneapolis, MN - The worst of the recession may be over for Minnesota’s manufacturers according to the State of Manufacturing, a major survey research project sponsored by Enterprise Minnesota and partners.

Less than one in ten manufacturing executives (9 percent) anticipates a continued recession in 2011, while 40 percent foresee economic expansion. Compared to the first State of Manufacturing survey two years ago, that represents a 47 percent decline in executives predicting recession and a 32 percent jump in those who project growth.

More executives are expecting an increase in revenues, profits, and capital expenditures. In fact, the percentage of respondents who project increases has nearly doubled over the past two years. Fifty-one percent expect their firm’s annual gross revenues to increase in 2011, up from 44 percent in 2010, and up from just 23 percent two years ago. Thirty-nine percent expect their firm’s profitability to increase, up from just 17 percent two years ago. Thirty-two percent project their capital expenditures to increase, an increase from 24 percent last year and 19 percent two years ago.

The full results of the State of Manufacturing will be revealed at a series of briefings with manufacturers, business leaders, and policymakers throughout Minnesota this week. A Twin Cities briefing will be held at 4:00 p.m. Tuesday, February 22, 2011 at the Doubletree Hotel Park Place. Pollster Rob Autry from Alexandria, Va.-based Public Opinion Strategies (POS) will provide analysis at the event.

POS conducted phone interviews with 400 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 17 focus groups of manufacturing executives conducted throughout Minnesota.

Statewide sponsors for the State of Manufacturing include: Baker Tilly Virchow Krause, LLP; the Center for Rural Policy and Development; Granite Equity Partners; Gray Plant Mooty; M&I Bank; and RJF Agencies.

“If the theme from manufacturing executives last year was ‘sunshine a cloudy day,’ then this year the clouds are beginning to part," said Enterprise Minnesota president & CEO Bob Kill. “The value of manufacturing to a healthy economy cannot be stated strongly enough. We saw manufacturing lead the way in job growth last year, and the optimism for this year should be a positive sign for the year ahead."

Other results:

Health care concerns linger: For the third year in a row, health care costs are a top concern for manufacturing executives, and the federal government reform plan is doing little to curb their worries. Seventy-one percent of executives list health care costs as their top concern, compared to 68 percent one year ago, and 64 percent two years ago. Recent federal health care reforms also cause heartburn for executives, with 58 percent listing its impact as a concern. Worry over healthcare costs may stem in part from affordable health care’s importance as a recruitment tool for manufacturers. Overall, affordable health care was ranked as the most important factor when it comes to attracting new employees, with 45 percent of respondents saying they consider it “very important” in their hiring efforts.

Looking for business north of the border: A small number of manufacturing executives are taking advantage of foreign markets, with less than one out of six (16 percent) exporting 11 percent or more of their product outside the United States, and most companies (56 percent) not exporting at all. However, of those who do export, 83 percent choose to export to Canada, making it the destination of choice for exporters in Minnesota’s manufacturing industry. Canada will also be a popular export location for those who are either thinking about starting to export for the first time, or expanding their exporting over the next few years, with fully 48 percent of executives saying they would be likely to increase their exports to Canada.

Customer stability improving: Compared to the darkest days of the recession, manufacturing executives are much less concerned about the financial stability of key customers. Just one-fourth of executives (25 percent) list financial stability of key customers as a key concern, compared to 41 percent two years ago, and 29 percent last year.
 

Full results including cross-tabulations and top-line results are available at www.stateofmanufacturing.com.

Pollster Rob Autry and Bob Kill, president of Enterprise Minnesota will be available for phone interviews throughout the day. Interviews can be arranged through Nate Duoss of Enterprise Minnesota at (612) 455-4213.

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