Survey say Indiana manufacturers see improvements

November 10, 2011

Most of Indiana's small- to medium-size manufacturers have weathered the recession and are expecting modest growth through 2015, a survey released Thursday found.

The Indiana Manufacturing Survey found that while 55 percent of respondents were involved in moderate to aggressive downsizing the past two years, 78 percent were planning at least moderate expansion in 2011-12, and that number increased to 85 percent by 2013-15.

"Finally, optimism is back," said Mark Frohlich, a professor of operations management at Indiana University who co-authored the survey.

He said that optimism shows in the fact that 60 percent of the manufacturers planned to increase investment in areas essential for revenue growth. It isn't resounding optimism, however. Respondents see 2011-12 as a period of slow improvement. Only 19 percent expect rapid growth.

Pat Kiely, president of the Indiana Manufacturers Association, said that's because manufacturers are concerned about next year's presidential election, whether the so-called super committee can agree on $1.2 trillion in federal government spending cuts before the end of the year and about what's happening in Europe.

"If they start heading into recession it is going to have a slowing impact here over the next year," Kiely said.

The report, commissioned by the certified public accounting firm of Katz, Sapper & Miller LLP, said Indiana manufacturers are at a crossroads in terms of strategic direction. It said manufacturers need to make the best of the new economy.

"This is a race that we cannot afford to lose because the outcome will likely determine the success of Indiana, if not our country, in the global economy for years to come," the report says.

The report said Indiana manufacturers need to be prepared for a second manufacturing revolution that Frohlich describes as "smart manufacturing," or what President Barack Obama called a "renaissance in American manufacturing" in June.

"It involves heavy automation and getting your workers involved," Frolich said.

The report compared changes in manufacturing to maneuvering across a battlefield while under constant attack, saying manufacturers must always be transforming and competing.

The report also found that 11 percent of survey respondents plan to open new manufacturing facilities in the next two years and 13 percent of respondents reported they anticipate relocating some manufacturing that had been moved offshore back to America in the next several years. The report didn't discuss the number of manufacturing jobs that could be created.

Indiana had an unemployment rate was 8.9 percent for September, slightly below the national rate of 9 percent.

Jerry Conover, director at the Indiana Business Research Center at Indiana University, said manufacturing jobs played a key role in helping Indiana after the Great Recession ended in June 2009, when it had had 426,500 manufacturing jobs and a 10.7 percent unemployment rate.

By July 2010, that number of manufacturing jobs grew to 450,700 and unemployment was 10.2 percent. Since then, though, manufacturing jobs have stagnated, dropping to a low of 446,600 in November 2010 and hitting a high of 454,700 this past July. The state had 453,600 manufacturing jobs in September, the latest numbers available.

"When the recession ended, we were starting to see substantial gains in manufacturing and it was helping lead the way for Indiana's growth in the first year or so after the recovery started. But since then, it's kind of been meandering," Conover said.

Most of the respondents said they expect the future business climate to remain financially challenging.


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