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Manufacturers say revenue rise slowing

September 17th, 2016

2 IU researchers tell summit at Ivy Tech of survey findings

By SHERRY SLATER | The Journal Gazette

Indiana manufacturers’ revenue gains, profit margins and capital investment rates are leveling off after strong growth coming out of the Great Recession, a new survey says.

But at least one researcher sees no reason to worry.

Full results of the 2016 KSM Manufacturing Survey won’t be released until next month. But two Indiana University researchers shared some preliminary data Friday at Ivy Tech Community College Northeast.

The event, a regional manufacturing summit, was co-sponsored by the Indiana Manufacturers Association, an industry trade group, and Katz Sapper & Miller, a tax and accounting firm with offices in New York, Indianapolis and Fort Wayne. About 50 people attended the luncheon.

Surveyed manufacturers across the state expect 7 percent revenue growth this year over last, said Steve Jones, finance professor at IU’s Kelley School of Business. 

That’s less than half of the 16 percent they experienced from 2011 to 2012, when they were gearing up to meet pent-up demand, he said. The intervening years saw revenue growth averaging about 10 percent.

Capital spending has also cooled off in that four-year span, with businesses planning to increase investment by 7 percent this year compared to last. That’s also down from 16 percent reached in 2012 over the previous year.

Manufacturers increased spending on machinery and other capital investments by 12 percent to 15 percent in the intervening years, Jones said.

Profit margins mirrored the decline in revenue growth with 6 percent expected this year over last. That rate was steady at about 10 percent until this year, he said.

But Jones isn’t suggesting that recession is looming. Instead, he said, it implies the recovery is maturing.

“We won’t expect to see the same growth going forward,” he said. “Six percent to 7 percent (growth) is really, actually pretty good.”

John Sampson, the Northeast Indiana Regional Partnership’s president and CEO, attended the event because manufacturing is responsible for more Hoosier jobs than any other industry. Seven of the 11 counties he represents rank in the top 5 percent nationally in manufacturing wages and jobs, he said.

The Regional Partnership supports efforts to align education and training programs to meet employers’ needs. Sampson pointed to the University of Saint Francis creating a Risk Management and Insurance program as a good example of that alignment.

Robert Parker, an Ivy Tech instructor, also talked to the group about ways the community college works with manufacturers to train prospective employees on high-tech skills, including advanced automation and robotics technology.

The Indiana Manufacturers Association used the occasion to highlight its work on behalf of members, including lobbying state legislators on various issues, including environmental policy, the corporate tax rate, unemployment insurance rates, health care costs, and road and bridge funding.

Andrew Berger, one of five full-time lobbyists the association employs, outlined some specific bills and how they fared in previous state legislative sessions. Although no one knows who will be elected to state offices in November, he said, the organization has to start preparing its tactics now.

Survey results being released in October also show Indiana manufacturers consider government regulation and a shortage of skilled workers the biggest obstacles to their success.