What a week for polls seeking to shed some light on whether and how much President Trump’s tariffs-heavy trade policies have affected American domestic manufacturing! Monday’s post reported on findings from the Dallas Federal Reserve bank pointing to the answer, “Not nearly as much damage as widely supposed, and some benefits.”
Since then, the results of two more surveys have been published, and they, too, indicate that the situation is much more complicated than portrayed by the gloom and doom claims and predictions from globalization cheerleaders in politics, the media, and the U.S. Offshoring Lobby. And one of them shows that more domestic American manufacturers are expecting net gains, not net losses, from the trade wars – and even that many are coping with more and higher tariffs by boosting their production at home.
Let’s start with the poll supporting the “tariffmageddon” narrative most strongly. It’s the National Association of Manufacturers’ (NAM) Quarterly Outlook Survey for the second quarter of 2019. The headline number for trade mavens: 56 percent of the 689 respondent companies called “Trade uncertainties” their “primary current business challenge.” This concern trailed only “Attracting and retaining a quality workforce” (68.6 percent). During the first quarter, trade uncertainties were the top concern of only 52.6 percent of respondents – so that number’s up, but not dramatically.
For good measure, along these lines, the expected growth rate for exports over the next year was just 0.4 percent – the lowest such figure provided in eleven quarters (going back to the third quarter of 2016).
In addition, respondents’ expectations of major performance indicators also weakened from the first quarter’s results, including their own company’s outlook, and the growth of sales, production, hiring, and capital spending.
But again, the difference between the first and second quarter responses wasn’t game-changing. Indeed, nearly 80 percent of the companies described their outlooks as positive (down from nearly 90 percent in March, sales growth predictions declined from 4.4 percent to 3.4 percent, ditto for production growth, full-time payroll growth dropped from 2.1 percent to 1.6 percent, and capital spending from 2.8 percent to 2.2 percent. The only indicator that slipped into negative territory was inventories (from 0.4 percent growth to 0.1 percent contraction).
So that’s the glass-half-empty evidence. And now for something if not completely different, pretty substantially so. It’s a survey of manufacturers from Sikich, a Chicago-based accounting and consulting firm, and its headline finding: More executives reported feeling optimistic about the impact of recent and ongoing trade developments (38 percent) than expected a negative impact (35 percent). And the most optimistic respondents came from larger companies (45 percent) and “companies with operations outside the U.S.” (51 percent).
Even better for the Trump administration and its trade policy supporters – Sikich’s findings about how companies are responding to these trade developments: “The action cited most often was manufacturing more products, or components, in the United States (45%).” At the same time, “a substantial portion of companies are looking to diversify procurement by sourcing purchased materials from new countries (36%) and sourcing raw materials from new countries (33%).” (Note: These answers aren’t necessarily mutually exclusive.)
In terms of their overall assessment of the economy, only 27 percent of the Sikich respondents believe that a U.S. recession over the next year is “extremely or very likely.” Interestingly, in light of their above trade-related responses, 49 percent of executives from larger companies – nearly twice as great a percentage – were expecting such a downturn.
And especially encouraging for all Americans: Not only were 63 percent of respondents nonetheless preparing for the possibility of a recession. But 53 percent of the total said they were “increasing the efficiency of production/business processes to reduce costs.” Such productivity-boosting measures are much more constructive – and economically beneficial – actions than whining about an imminent end to access to government-subsidized, artificially cheap inputs from places like China.
Nor do the Dallas Fed and Sikich results look like outliers. Their results are very much in line with those of polls I reported on last September – from the big Swiss-owned investment bank UBS, and Yahoo Finance.