Colorado manufacturers continue to face a bevy of challenges, both internal and external, which pose significant concerns. Not only do these companies have to contend with the persistent labor shortage but additional complications from external economic forces, supply chain issues, and the scheduled tax increases have complicated matters. According to the National Association of Manufacturers Outlook Survey – Second Quarter 2024, the top issues facing the industry are the persistent worker shortage, the sunsetting of various tax cuts, and increases in the cost of raw materials, amongst others. The overall sentiment about the future increased only a marginal amount reflecting the depth of these challenges. To help clients, prospects, and others, WhippleWood CPAs has provided a summary of the key details below.
About the Survey
The survey includes responses from 217 manufacturers and was conducted in the field between May 14th and June 3, 2024. Respondents include a mix of manufacturers by size including 43 responses (20.1%) from small manufacturers, 103 (48.1%) responses from mid-size manufacturers, and 68 (31.8%) responses from large manufacturers. It is conducted on a quarterly basis and is designed to track issues, challenges, and overall industry sentiment.
Key Survey Findings
- Sales Growth – There appears to be some optimism about sales growth as it is expected there will be a 2.2% increase over the next 12 months. It was found that 58% predict sales will grow over the next four quarters while 32.7% believe it will increase 5% or more. In contrast, 19.8% anticipate a decline with 21.7% expecting no change. It is important to note, large firms predicted the strongest growth (3.1%), while small companies expect less robust growth (1.8%).
- Production Growth – There is also limited optimism about production increases as it is expected there will be 2% growth over the next 12 months. It was determined that 54% of respondents expect output to rise over the coming months, while 20.3% expect a decline. More than 31% anticipate growth of 5% or more over the next year. It is important to note that the results were consistent across all business sizes.
- Workforce Issues Persist – The inability to attract and retain qualified workers remains a top concern (67%). As a remedy, many are turning to special workplace programs including internships (74.7%), apprenticeship or earn and learn models (57.3%), high school partnerships (55.1%), and college/university partnerships (48.9%). These programs are designed to engage individuals with different skill sets with the industry and employment opportunities.
- Prevent Tax Increases – Industry companies are seriously concerned about the federal tax increases scheduled to take effect in 2025. It was determined that 93% of respondents want Congress to act to prevent increases. This includes the already expired immediate expensing for the R&D credit, interest deductibility on loans, and 100% bonus depreciation. Respondents also indicated if Congress does not make a change there will be adverse consequences. The top areas of concern include (73%) limited capital investment opportunities, decreased job creation (65.4%), difficulty competing globally (52.6%), and a reduction in R&D spending (51.7%).
- Complex Permitting Limiting Investments – The complexity of permitting is a major reason more investments have not been made in manufacturers. It was discovered that the length and complexity of the permitting system is harmful to investment decisions (72.3%). Many believe that if it was streamlined it would be possible to expand operations (41.9%) and hire more workers (21.9%).
Contact Us
These findings provide significant insight into the challenges and issues plaguing the manufacturing industry. The concern about federal tax increases is a significant one and it is shared by businesses in other industries. If you have questions about the information outlined above or would like to discuss how to prepare your company for the tax changes, WhippleWood CPAs can help. For additional information call 303-989-7600 or click here to contact us. We look forward to speaking with you soon.