TMR - Survey shows small firms anticipate continued expansion

Posted July 6, 2000

Manufacturing News

Survey shows small firms anticipate continued expansion

The nation's small manufacturers expect continued economic growth in this year and next, with an increase in sales, profitability and moderate investment growth, according to the National Association of Manufacturers' (NAM) (www.nam.org) annual survey. Seventeen percent of the 10,000 small and medium-size member companies responded to the survey.
"The good news is that 89 percent of small firms expect to increase employee wages in 2000, in line with productivity, which in 1999 rose by 6.4 percent, and this year should be at least six percent," NAM President Jerry Jasinowski said. "Overall, our survey indicates a strong and sustainable pace of growth for the nation's small manufacturers on the economic front and warning signs on the policy front, such as punitive taxes and burdensome regulations, that could stifle the small manufacturing growth and job creating engine."
Jasinowski also issued a warning to small manufacturers. He urged companies not to miss out on e-commerce and other Internet-related business opportunities.
"While our survey shows that small manufacturers are continuing to experience growth, its finding that only a small percentage are capitalizing on the Internet highlights a potential pitfall," Jasinowski said. "Small firms need to get in the e-commerce game, or they are going to be shut out of a critical part of the marketplace. We expect manufacturers to increase their use of this dynamic business tool because of the decreasing cost of technology and the overall growing global dependence on the Internet.
Specific survey findings supporting moderate economic growth show:

Profits look stronger in 2000. Although profits dropped from 45.5 percent in 1998 to 40.6 percent in 1999, nearly 50 percent of small firms expect to be more profitable in 2000.
There is a modest dip in capital investment. Twenty percent expect to decrease capital investment in 2000, roughly one percentage point lower than experienced in 1999.
On average, 41 percent of small firms expect the replacement cost of the major equipment that is on the factory floor to be more than $1 million — a strong argument for the elimination of the estate tax. Currently, the IRS audit after an owner's death looks at liquid and equipment assets equally.

Jasinowski went on to note, "While the survey indicates that the vast majority (97 percent) of small manufacturers offer health care benefits to employees, the significant percentage (39.2 percent) of firms noting that premiums have increased by 11 to 20 percent in the past year underscores the need to avoid legislation that would further raise costs. The Dingell-Norwood 'Patients' Bill of Rights,' which would raise premium costs by a minimum of 4.1 percent and unquestionably expose employers to increased legal liability, would seriously jeopardize the health benefits of small manufacturing employees by forcing firms to pass on more costs to workers or drop coverage altogether.
"On a more positive note, the skilled worker crunch clearly is spurring small manufacturers to recruit and retain employees by offering the innovative compensation and benefits packages that were once in the purview of only large companies," said Jasinowski. The survey finds that about three-quarters of participating companies offer profit sharing and 401(K) plans, one-half provide tuition reimbursement and 80 percent offer incentive bonuses.

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