NAM Manufacturers Outlook Survey for Q3

By Chad Moutray and Mary Frances Holland

Manufacturing sentiment hit a post-pandemic low, or the lowest in seven years if the pandemic were excluded. The National Association of Manufacturers (NAM) conducted the Manufacturers’ Outlook Survey for the third quarter of 2023 from Aug. 17 to 31, and 65.1% of respondents felt either somewhat or very positive in their company’s outlook, edging down from 67.0% in the second quarter (Figures 1 and 2). It was the fourth straight reading below the historical average (74.9%). The NAM Manufacturing Outlook Index measured 43.3 in the third quarter, down from 44.6 in the second quarter.

Fewer respondents expect a recession in the next year than three months ago, with roughly one-third uncertain. Roughly 42% of manufacturers believed that the U.S. economy would experience a recession over the next 12 months, or through Q3 2024 (Figure 3). This is down from the nearly 57% of respondents who were expecting a recession last quarter. Now, 27.5% felt that the economy would avoid a recession, with 30.3% uncertain. 

Workforce challenges continue to dominate. More than 72% of manufacturers cited the inability to attract and retain employees as their top primary challenge (Figure 4), followed by a weaker domestic economy (60.7%), rising health care costs (60.1%) and an unfavorable business climate (56.7%). It continues to be notable that inflation (45.5%) and supply chain (37.8%) concerns—both of which dominated in 2022—have continued to moderate.

Manufacturers continue to experience the cumulative impact of federal regulations on their business. Indeed, concern about an unfavorable business climate was the highest in six years (Q2 2017). In this survey, 70.2% of manufacturers would purchase more capital equipment if the regulatory burden on manufacturers decreased, with 48.6% hiring more workers, 48.6% increasing compensation, 42.5% expanding their U.S. facilities and 38.4% investing in research (Figure 6). In addition, 69.1% of small manufacturers would hire more workers or increase compensation if their regulatory burden decreased, or 63.2% of all respondents.

To view the complete survey results: