US manufacturers’ morale plummeted in the second quarter of 2022 as companies grappled with rising inflation, labor shortages and supply chain difficulties.
While optimism for their own business still going strongHowever, leaders expressed concerns about the economy as a whole and questioned the Federal Reserve’s ability to avoid a recession.
The National Association of Manufacturers’ second-quarter 2022 Manufacturers Outlook survey released Wednesday showed that its manufacturing expectations index fell to 55 in the last quarter, down from 59 in the first quarter. During the same period, the percentage of respondents expressing a positive outlook for their companies decreased from 88.8% in the first quarter to 82.6% in the second quarter.
In the latest survey, manufacturers overwhelmingly cited increases in raw material costs as the main challenge for their business, with 90.1% of respondents citing this as a primary problem they face.
“During multiple crises, manufacturers have demonstrated remarkable resilience, but there is nothing wrong with having darker clouds on the horizon,” Jay Timmons, NAM President and CEO, said in a statement announcing the survey results. “The majority of members surveyed believe that inflationary pressures increase the likelihood of a recession over the next year.”
Three-quarters of NAM manufacturers said inflationary pressures were worse today than they were six months ago, and more than half (59.3%) said they believe inflationary pressures will make a recession more likely in the next 12 months.
Nor have manufacturers expressed optimism that the Fed will be able to prevent a recession as a central bank Battles to rein in inflation which is currently at its highest level in 40 years.
More than 52% of survey respondents said they did not think the Fed would be able to avoid a recession in 2022 or 2023, while only 11.6% answered that the Fed would succeed in making a “soft landing”. The remaining 36.3% said they are unsure about whether the Fed can pull the US out of inflation while avoiding a recession this year or next.
“The Russian war on Ukraine undoubtedly exacerbated the rising costs of energy and food,” Timmons said. “This, along with record deficit spending since the pandemic began, has resulted in the emergence of Highest inflation rate since 1981. “
“But actions here at home can help relieve these pressures, including first and foremost harnessing all the energy resources available to us locally and quickly – and refraining from imposing new taxes on manufacturers or families,” he added.
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