Manufacturing imageHere are the results of McGladrey’s annual survey of middle market manufacturers and distributors. Conducted in March of 2013, this year’s survey results suggest that the industrial sector is generally optimistic about its growth prospects for the coming year, but see an array of regulatory and policy-related issues as threats to its continued recovery and prosperity.

The survey reflects the attitude I’ve developed over the years–just tell me the rules of the game so I know how to play. Uncertainty over the rules is a drag on optimism and investment.

According to the survey, manufacturers and distributors have high hopes for the next 12 months:
· 85% report optimism about their growth prospect over the next 12 months and 83% expect an increase in sales.
· More than three-quarters of respondents (76%) predicted increases in net income, with an average expected increase of 16.5%.
· Nearly two-thirds (63%) expect to add jobs in the next year.

However, the survey results also indicate that the sector’s optimism is tempered by perceived threats from external forces beyond their control, particularly those related to the regulatory/policy landscape and the availability of skilled workers.

Manufacturers and distributors see health reform, government regulation, the federal deficit and other policy/regulatory issues as the biggest threats to future growth. While respondents were concerned about traditional business threats like materials pricing, far more respondents see regulatory and policy-driven pressures as the biggest threats to continued growth.

The top four (out of 17) most commonly cited threats to growth were related to government policy.

Health reform implementation was a close second (71%), followed by social security/Medicare payroll taxes (69 percent); and the federal deficit (66%).

More than half of respondents expect the “skills shortage” to limit growth over the next year.

More than half (57%) of respondents said their growth would be limited by the lack of skilled workers.

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