Connecticut Manufacturing Industry Survey€¦ · the manufacturing industry. As in 2013’s...

Connecticut Manufacturing Industry Survey

March 2014

2014 Connecticut Manufacturing Industry Survey Report Economic Conditions and Outlook Rated Negatively; Positive Ratings Increase in 2014 Survey While still viewed negatively, manufacturers rate economic conditions in Connecticut slightly higher in 2014 than they did in 2013 – both in terms of Connecticut overall, and specifically for the manufacturing industry. As in 2013’s survey, most manufacturers anticipate that near term economic conditions in Connecticut will remain the same. There is a decline in the percentage of manufacturers who say conditions will improve and a very small increase in the percentage of manufacturers who say economic conditions will decline a great deal or somewhat. Looking ahead specifically for the manufacturing industry, most manufacturers continue to say conditions will stay the same (39% in 2014; 41% in 2013). There is more pessimism however, with an increase in the percentage of manufacturers who say conditions will worsen (28% in 2013 vs 33% in 2014). About the same percentage, three in ten in both 2013 and 2014, anticipate that economic conditions will improve a great deal or somewhat.

Prior Year Sales Lower in 2013 than 2012 When comparing their businesses sales for 2013 vs 2012, about four in ten (44%) manufacturers say their sales were higher, about one quarter (26%) say sales were equal to the prior year, and about three in ten (31%) report sales lower than the prior year. Compared to the 2013 survey,

Rating of economic conditions

Connecticut Overall Manufacturing Industry 2014 2013 2014 2013 Excellent 1% 0% 1% 0% Good 17% 14% 17% 14% Fair 64% 65% 56% 56% Poor 18% 21% 27% 30%

Projection of economic conditions in the next 6-12 months

Connecticut Overall Manufacturing Industry 2014 2013 2014 2013 Improve a great deal 1% 0% 1% 1% Improve somewhat 25% 31% 27% 29% Stay about the same 53% 48% 39% 41% Decline somewhat 20% 19% 30% 24% Decline a great deal 2% 2% 3% 4%

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this represents a 12 point drop in the percentage of businesses reporting greater sales than the prior year (44% in the 2014 survey; 56% in the 2013 survey). Additionally, the percentage of businesses reporting lower sales for the prior year increased by 11 points, with 31% reporting lowers sales in the prior year in the 2014 survey and 20% reporting lower sales in the 2013 survey. Among businesses that saw increased sales compared to the prior year, the average increase is 13.8%, a finding that is lower than the average increase of 15.24% reported in the 2013 survey. Businesses with lower sales compared to the prior year report a smaller decrease in the 2014 survey than the 2013 survey, with an average decrease of 11.63% in the 2014 survey and an average decrease of 11.92% in the 2013 survey. Sales Forecasts for Prior Year Higher Than Expected 2014’s survey showed an increase in the percentage of manufacturers saying their sales for the prior year were greater than forecasted, and a slight decrease in the percentage of manufacturers saying their sales for the prior year were less than forecasted. Both the 2014 and 2013 surveys reflect about three in ten manufacturers saying their sales were equal to what they had forecasted. Among businesses that saw increased sales above what they had forecasted, 2014’s survey showed a smaller average increase (9.4%) than 2013’s survey (10.65%). Similarly, businesses that saw decreased sales versus what they had projected also reported a smaller average decrease in 2014 (10.66%) than in 2013 (14%). Future Sales Predicted to Increase Looking ahead, Connecticut’s manufacturers express optimism for their sales in the coming year, with more than seven in ten (71%) forecasting a large or slight increase. This is a sizeable upswing over the percentage of manufacturers forecasting increased sales (53%) in the 2013 survey. Additionally, the 14% of manufacturers projecting a slight or large decrease in sales for the coming year is less than the 21% forecasting a decrease in the 2013 survey. Sources of Manufacturers’ Revenues Remain Stable As in the 2013 survey, the vast majority (94%) of manufacturers’ revenues come from product sales. Slightly less than one fifth (19%) of manufacturers’ revenues come from service, and about 5% of manufacturers’ sales come from “other.”

Sales forecast for the coming year 2014 2013 Large increase 13% 11% Slight increase 58% 42% About the same 16% 22% Slight decrease 14% 14% Large decrease 0% 7% Not sure 0% 1% Don’t forecast sales 0% 2%

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Sales Growth: Threats and Opportunities Connecticut manufacturers face a wide range of issues which present either a “very” or “somewhat” serious threat to their business’ sales growth. “Recession,” the threat rated most serious by manufacturers in the 2013 survey (82%) fell to second place in the 2014 survey (73%). In this year’s survey, “Competitive threats” was cited most highly, with 77% of manufacturers saying it represents either a “very” or “somewhat” serious threat to their sales growth. Threats to sales growth

Very serious threat

Somewhat serious threat

Not too serious threat

Not at all a threat

Does not apply to our

business Raw material price increases 18% 51% 26% 4% 1% Raw material price increases (2013) 26% 46% 24% 2% 2% Labor increases 6% 57% 32% 6% 0% Labor increases (2013) 21% 53% 25% 1% 1% Overhead increases 27% 46% 23% 4% 0% Overhead increases (2013) 33% 48% 18% 1% 0% Recession 25% 49% 22% 4% 0% Recession (2013) 48% 34% 15% 2% 1% Availability of skilled labor 25% 43% 26% 7% 0% Availability of skilled labor (2013) 33% 39% 26% 1% 1% Competitive threats 27% 50% 20% 3% 0% Competitive threats (2013) 21% 46% 29% 2% 1% Environmental issues 7% 21% 55% 16% 1% Environmental issues (2013) 6% 28% 49% 12% 5% Federal regulatory issues 18% 42% 33% 6% 1% Federal regulatory issues (2013) 20% 38% 32% 6% 4% State regulatory issues 16% 38% 40% 4% 1% State regulatory issues (2013) 26% 38% 27% 6% 3% Staffing issues 15% 41% 30% 14% 0% Staffing issues (2013) 10% 39% 43% 8% 0% Production capacity limitations 11% 22% 43% 22% 3% Production capacity limitations (2013) 7% 17% 44% 30% 1% Technology changes 7% 36% 38% 19% 0% Technology changes (2013) 3% 26% 49% 20% 1% Reduced demand for goods and/or services (2014 only) 23% 41% 29% 7% 0%

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In general, manufacturers consider a wide range of actions to increase their business’ sales revenue. As in 2013’s survey, the most widely considered actions to increase sales growth are:

• Increased domestic sales (96%) • New products for existing markets (87%) • New markets for existing products (86%)

Actions to consider for increased sales revenue

Definitely will consider this

action

May consider

this action

Probably will not consider this action

Definitely will not consider this action

Does not apply

Increased domestic sales 71% 25% 3% 0% 1% Increased domestic sales (2013) 82% 13% 4% 1% 1% Increased export sales 44% 27% 18% 4% 7% Increased export sales (2013) 51% 25% 15% 1% 8% New products for existing markets 63% 24% 3% 3% 8% New products for existing markets (2013) 59% 27% 6% 1% 7% New markets for existing products 61% 25% 7% 3% 4% New markets for existing products (2013) 54% 25% 11% 0% 10% New products in new markets 46% 31% 13% 1% 10% New products in new markets (2013) 40% 37% 13% 2% 8% Expansion of current production capacity 32% 33% 22% 8% 4% Expansion of current production capacity (2013) 40% 31% 20% 9% 1% Acquisitions 24% 26% 25% 18% 7% Acquisitions (2013) 17% 29% 30% 19% 6%

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In 2012, Connecticut manufacturers raised their prices due to a number of factors, most prominently material increases and labor increases. In 2013, for most categories, the percentage of manufacturers reporting price increases dropped or stayed approximately the same. Percentage of business categories that saw price increases

2014

2013 (data represents the total percentage of

responses given – will add to more than 100%) Labor increases 31% 41% Material increases 55% 57% Utility costs increases 17% 25% Freight increases 14% 28% Other overhead cost increases 30% 30% Current pricing arrangements do not allow adjustments 13% 13% Unable to raise prices due to competitive situation 42% 40% Other, please specify... 3% 3%

Employment Levels Generally Stable; Increases Projected Overall, Connecticut manufacturers’ current employment levels are slightly lower compared to the last survey. Manufacturers report an average number of employees of 78 in the 2014 survey, compared to an average of 80 in the 2013 survey. The average number of part time employees dipped slightly as well, from three to two. More substantial was the decline in temporary employees, with the average number declining from nine to five. Employment status

Full Time 2014 2013 Average 78 80 Most frequently given response 25 25

Part Time 2014 2013 Average % 2 3 Most frequently given response 1 1

Temporary 2014 2013 Average % 5 9 Most frequently given response 0 0

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When comparing current employment levels versus the prior year, most manufacturers (46%) say levels are either slightly or significantly up. Eighteen percent (18%) say that levels are either slightly or significantly down and more than a third (36%) say there has been no change. These numbers reflect a positive trend compared to the findings of the 2013 survey, with a higher percentage of manufacturers reporting increased employment levels and a lower percentage reporting decreased employment levels. Overall, as manufacturers forecast future employment levels, most say they anticipate either increased levels (50%) or no change (47%). A small minority (4%) project decreased employment levels for next year. The 4% of manufacturers forecasting a decline in employment levels represents a sizeable drop from the percentage forecasting a decline (13%) in 2013’s survey. Qualified Workers Remain Hard to Find Filling jobs with qualified workers continues to be challenge for Connecticut’s manufacturers, with more than three quarters (76%) saying they have difficulty finding qualified employees. The two reasons most frequently cited by manufacturers for this difficulty is the lack of qualified candidates (91% of responses) and the special skills needed (63%). Compared to 2013’s survey, more manufacturers report using recruiting companies to find qualified employees (2014 65%; 2013 54%), and fewer manufacturers say they use newspaper ads (2014 42%; 2013 51%). As in 2013, a majority (54%) of manufacturers report not using Connecticut hiring incentives. 2014 did however see increased levels of manufacturers saying they have used the STEP UP Program (Subsidized Training and Employment Program) and the tax credit for hiring veterans.

Comparison of employment levels

2014 2013 Up significantly 4% 5% Up slightly 42% 34% No change 36% 34% Down slightly 15% 24% Down significantly 3% 3%

Forecasted employment levels


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Background In early 2014 the Manufacturers Alliance of Connecticut (MAC) undertook a research project to learn more about the opinions of Connecticut’s manufacturing businesses. The goal was to build on the findings of 2013’s manufacturing industry survey, and to also explore new issues relevant to manufacturing in Connecticut. MAC was joined in this initiative by a number of leading manufacturing and business organizations from across the state:

• Central Connecticut Chambers of Commerce • CONNSTEP, Inc. • Employers Association of the NorthEast (EANE) • Middlesex County Chamber of Commerce • New England Spring and Metal Stamping Association • New Haven Manufacturers Association • Northwest Connecticut's Chamber of Commerce • Smaller Manufacturers Association of CT, Inc. • Waterbury Regional Chamber

The survey was designed to build upon the baseline measurement of manufacturers’ opinions on important issues impacting their business. The goal of the survey was to provide manufacturers, business leaders and policymakers with current insights on the manufacturing industry in Connecticut and the challenges faced by the state’s manufacturers. Methodology Results are based on online surveys administered between January 16 and February 18, 2013. Prospective respondents from Connecticut’s manufacturing industry were invited to participate in the survey and 138 respondents completed the survey. The sampling error for 138 completed surveys is approximately +/- 8.2% at the 95% level of confidence. This means we are 95 percent certain that, if all Connecticut manufacturers were asked these questions during the same timeframe, the results of that survey would differ by no more than 8.2 percentage points in either direction from the results reported here.

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2014 Connecticut Manufacturing Industry Survey - Annotated Questionnaire Q1. How would you rate economic conditions in Connecticut overall?

2014 2013 Excellent 1% 0% Good 17% 14% Fair 64% 65% Poor 18% 21%

Q2. How would you rate economic conditions in Connecticut specifically for the manufacturing industry?

2014 2013 Excellent 1% 0% Good 17% 14% Fair 56% 56% Poor 27% 30%

Q3. Looking ahead to the next 6-12 months, do you anticipate that economic conditions in Connecticut will:

2014 2013 Improve a great deal 1% 0% Improve somewhat 25% 31% Stay about the same 53% 48% Decline somewhat 20% 19% Decline a great deal 2% 2%

Q4. Looking ahead to the next 6-12 months, do you anticipate that economic conditions in Connecticut specifically for the manufacturing industry will:

2014 2013 Improve a great deal 1% 1% Improve somewhat 27% 29% Stay about the same 39% 41% Decline somewhat 30% 24% Decline a great deal 3% 4%

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Q5. How would you compare your business’ sales for 2013 versus 2012?

2014 2013 2013 greater than 2012 44% 56% 2013 equal to 2012 26% 24% 2013 less than 2012 31% 20%

Q6. By what percentage did your 2013 sales INCREASE compared to your 2012 sales?

2014 2013 Average % increase 13.8% 15.24% Most frequently given response 10% 10%

Q7. By what percentage did your 2013 sales DECREASE compared to your 2012 sales?

2014 2013 Average % decrease 11.63% 11.92% Most frequently given response 10% 10%

Q8. How would you compare your business’ 2013 sales versus what you had forecasted for 2013’s sales?

2014 2013 Greater than forecasted 26% 19% Equal to forecasted 28% 31% Less than forecasted 44% 45% Don't forecast sales 2% 5%

Q9. By what percentage did your 2013 sales INCREASE over what you had forecasted for 2013?

2014 2013 Average % increase 9.4% 10.65% Most frequently given response 10% 10%

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Q10. By what percentage did your 2013 sales DECREASE over what you had forecasted for 2013?

2014 2013 Average % decrease 10.66% 14% Most frequently given response 10% 10%

Q11. What is your expectation for this year’s (2014) projected sales compared to 2013's sales?

2014 2013 Large increase 13% 11% Slight increase 58% 42% About the same 16% 22% Slight decrease 14% 14% Large decrease 0% 7% Not sure 0% 1% Don’t forecast sales 0% 2%

Q12. Please fill in the appropriate percentage that comprised your business’ total revenue in 2012.

Product sales 2014 2013 Average % 93.66% 90.75% Most frequently given response 100% 100%

Service 2014 2013 Average % 18.57% 26.09% Most frequently given response 0% 0%

Other 2014 2013 Average % 5.3% 6.4% Most frequently given response 0% 0%

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Q13. How much of a threat are each of the following to your business’ sales growth?

Very

serious threat

Somewhat serious threat

Not too serious threat

Not at all a threat

Does not apply to our

business Raw material price increases 18% 51% 26% 4% 1% Raw material price increases (2013) 26% 46% 24% 2% 2% Labor increases 6% 57% 32% 6% 0% Labor increases (2013) 21% 53% 25% 1% 1% Overhead increases 27% 46% 23% 4% 0% Overhead increases (2013) 33% 48% 18% 1% 0% Recession 25% 49% 22% 4% 0% Recession (2013) 48% 34% 15% 2% 1% Availability of skilled labor 25% 43% 26% 7% 0% Availability of skilled labor (2013) 33% 39% 26% 1% 1% Competitive threats 27% 50% 20% 3% 0% Competitive threats (2013) 21% 46% 29% 2% 1% Environmental issues 7% 21% 55% 16% 1% Environmental issues (2013) 6% 28% 49% 12% 5% Federal regulatory issues 18% 42% 33% 6% 1% Federal regulatory issues (2013) 20% 38% 32% 6% 4% State regulatory issues 16% 38% 40% 4% 1% State regulatory issues (2013) 26% 38% 27% 6% 3% Staffing issues 15% 41% 30% 14% 0% Staffing issues (2013) 10% 39% 43% 8% 0% Production capacity limitations 11% 22% 43% 22% 3% Production capacity limitations (2013) 7% 17% 44% 30% 1% Technology changes 7% 36% 38% 19% 0% Technology changes (2013) 3% 26% 49% 20% 1% Reduced demand for goods and/or services (2014 only) 23% 41% 29% 7% 0%

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Q13a. In addition to the items described above, are there other threats to your business' sales growth?

Suggestions from respondents include: “Healthcare costs” (multiple mentions) “Enough working capital” (multiple mentions) “Loss of section 179” “Lower cost states” “Innovative product development” “Corporate taxes” “Sequestration/Federal budget issues” (multiple mentions) “State of Connecticut’s fiscal mess” (multiple mentions) “Present demonizing of successful businesses” “Foreign competition” “Availability of bank money” “Global transfer of orders from USA to far east” “Dumped imports” “Defense budgets” “Legal issues with patents” “Changing consumer habits” “Effects of sequestration” “Cost of doing business in Connecticut”

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Q14. Are you considering any of the following actions to increase your business’ sales revenue?

Definitely will consider this

action

May consider

this action

Probably will not consider this action

Definitely will not consider this action

Does not apply

Increased domestic sales 71% 25% 3% 0% 1% Increased domestic sales (2013) 82% 13% 4% 1% 1% Increased export sales 44% 27% 18% 4% 7% Increased export sales (2013) 51% 25% 15% 1% 8% New products for existing markets 63% 24% 3% 3% 8% New products for existing markets (2013) 59% 27% 6% 1% 7% New markets for existing products 61% 25% 7% 3% 4% New markets for existing products (2013) 54% 25% 11% 0% 10% New products in new markets 46% 31% 13% 1% 10% New products in new markets (2013) 40% 37% 13% 2% 8% Expansion of current production capacity 32% 33% 22% 8% 4% Expansion of current production capacity (2013) 40% 31% 20% 9% 1% Acquisitions 24% 26% 25% 18% 7% Acquisitions (2013) 17% 29% 30% 19% 6% Q15. During 2013, did you raise prices for:

2014

2013 (data represents the total percentage of

responses given – will add to more than 100%) Labor increases 31% 41% Material increases 55% 57% Utility costs increases 17% 25% Freight increases 14% 28% Other overhead cost increases 30% 30% Current pricing arrangements do not allow adjustments 13% 13% Unable to raise prices due to competitive situation 42% 40% Other, please specify... 3% 3%

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Q16. What is the number of employees at your business?

Full Time 2014 2013 Average 78 80 Most frequently given response 25 25

Part Time 2014 2013 Average % 2 3 Most frequently given response 1 1

Temporary 2014 2013 Average % 5 9 Most frequently given response 0 0

Q17. How would you compare your current employment level versus last year’s employment level?


Q18. How would you forecast your expected employment for next year compared to this year’s current employment level?


Q19. Do you use temporary or seasonal employees?

Response 2014 2013 Yes 54% 60% No 46% 40%

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Q20. Do you have any difficulty in finding qualified employees?

Response 2014 2013 Yes 76% 78% No 24% 22%

Q21. Which of the items listed below are reasons that your business has difficulty in finding qualified employees?

2014

2013

(data represents the total percentage of responses given – will add to more than 100%)

Lack of qualified candidates 91% 87% Special skills needed 63% 77% Difficulty attracting shift workers 20% 20% Benefit costs prohibit additional hiring 19% 16% Pay rates not competitive 11% 8% Pre-employment drug testing 9% 11% Working conditions 6% 2% Other, please specify... 0% 2%

Q22. How do you find qualified employees?

2014

2013

(data represents the total percentage of responses given – will add to more than 100%)

Recruiting companies 65% 54% Internet / Job Boards 62% 63% Internal HR function 44% 47% Newspaper ads 42% 51% Employee referral programs 41% 48% State employment assistance 27% 20% Job fairs 23% 27% Other, please specify... 11% 11%

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Q23. What Connecticut hiring incentives, if any, has your business taken advantage of?

2014 2013 STEP UP (Subsidized Training and Employment Program) 33% 23% JET (Job Expansion Tax Credit) 24% 25% Tax credit for hiring veterans 14% 10% Apprenticeship Tax Credit 13% 11% Other, please specify... 3% 5% We have not used any Connecticut hiring incentives 54% 58%

Demographics QD1. In what year was your business founded?

Year Range 2013 2014 1825-1925 14% 16% 1926-1950 18% 21% 1951-1975 27% 33% 1976-2000 36% 26% 2001-2013 5% 4%

QD1a. In what year was your business founded? | Incorporation year, if different than founding year

Year Range 2013 2014 1900-1950 24% 13% 1951-1975 27% 39% 1976-2000 38% 35% 2001-2014 11% 13%

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QD2. Which sector of the economy does your business predominantly serve:

2014 2013 Construction 4% 3% Defense 3% 5% Aerospace 17% 16% Medical 4% 7% Automotive 3% 7% Electronics 9% 9% Consumer goods 7% 10% Industrial 5% n/a Serve multiple sectors 43% 34% Other, please specify... 3% 10%

QD3. Which best describes the ownership of your business?

2014 2013 Privately held 47% 60% Public company 9% 5% Closely held 3% 0% Publicly traded 1% 3% Family owned 34% 26% Part of a larger company 6% 6%

QD4. What is your business’ structure?

2014 2013 C-Corp 27% 32% S-Corp 50% 46% LLC 21% 18% Partnership 2% 2% Other 2% 3%

QD6. What best describes the location of your business’ manufacturing operations? 2014 2013 Located only within Connecticut 78% 74% Located only outside of Connecticut 2% 0% Located both within and outside of Connecticut 21% 26%

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QD6a. What is the primary location - city or town - of your Connecticut manufacturing operations? Companies with operations located only within Connecticut

% Waterbury 17% Bristol 9% Milford 9% East Windsor 6% Middletown 6% Bridgeport 4% Shelton 4% Stratford 4% Thomaston 4% Ansonia 2% Berlin 2% Bloomfield 2% Cheshire 2% Clinton 2% East Granby 2% Glastonbury 2% Hartford 2% Manchester 2% Meriden 2% Middlefield 2% Naugatuck 2% Oxford 2% Plainville 2% Prospect 2% Rocky Hill 2% Southington 2% Torrington 2% Watertown 2% Woodbridge 2%

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QD7c. What is the primary location - city or town - of your Connecticut manufacturing operations? Companies with operations located both within and outside of Connecticut % New Haven 15% Wallingford 15% Bridgeport 8% Fairfield 8% Haddam 8% Middletown 8% Oxford 8% Shelton 8% Southington 8% Stratford 8% Waterbury 8%

QD7d. What is the primary location of your manufacturing operations outside of Connecticut? Companies with operations located both within and outside of Connecticut

% Florida 29% Massachusetts 14% South Carolina 14% Colorado 7% Indiana 7% Iowa 7% Kentucky 7% Minnesota 7% Wyoming 7%

QD8. What is your business’ tax reporting period?

% Calendar year 74% Other year end 26%

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QD9. What is the approximate square footage of the main building of your facility?

% Less than 5,000 sq. ft. 6% 5,000 sq. ft. to less than 10,000 sq. ft. 6% 10,000 sq. ft. to less than 20,000 sq. ft. 22% 20,000 sq. ft. to less than 30,000 sq. ft. 12% 30,000 sq. ft. to less than 40,000 sq. ft. 13% 40,000 sq. ft. to less than 50,000 sq. ft. 6% 50,000 sq. ft. or more 36%

QD10. How old is the facility in which your business is located?

% Less than two years old 1% 2 – 5 years old 1% 6 – 10 years old 1% 11 – 20 years old 17% 21 – 30 years old 19% More than 30 years old 59%

QD11. What is the primary energy source used to heat your business?

% Electricity 7% Natural Gas 78% Propane 3% Oil 10% Other 1%

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Connecticut Manufacturing Industry Survey€¦ · the manufacturing industry. As in 2013’s...

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