In this episode, we have our guest Chad Moutray, who discusses the current economic conditions and manufacturing industry forecast. He also translates economic insight for small-to-medium-sized manufacturers who may not understand how these issues might affect them. Finally, we discussed several other topics, including supply chain, consumer behavior in the new normal, pandemic-driven business trends, changes due to new administration, and much more.
- [0:22] Intro
- [4:01] Personal journey and current focus
- [5:12] Perspective on growth
- [6:24] Impact of macroeconomic trends for manufacturers
- [11:53] Business growth during pandemic
- [13:07] Why is service industry not growing in proportion to manufacturing?
- [16:22] Manufacturing workforce challenges vs unemployment rate
- [19:06] Supply chain disruptions for manufacturers
- [23:42] Business model changes due to the pandemic
- [25:41] Using external market data for internal business decisions
- [33:05] Closing thoughts
- [33:50] Outro
- The skills gap is a structural problem. We’ve known this problem is going to be happening for the last decade. There’s the worry out there about where’s that next generation of workers going to come from. And so part of that is, I think, a perceptional challenge.
- Sometimes, part of the skill gap challenge is that not only do you have a skills mismatch, but you also have a location mismatch, and that is the challenge that we have quite a bit.
- Pre-COVID, packaged foods, were kind of starting to lose favor, especially amongst millennials. And yet, during this just crisis, as everyone has stayed home, packaged foods have gained favor, right? So if I was selling in the packaged food business, you’d have to ask yourself, is that a trend that’s going to stay?
- There’s an enormous amount of interest, not just in the economy, but in what’s happening in terms of the policy. I think to be a good forecaster. You almost have to kind of have a good handle about it.
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Chad Moutray is chief economist for the National Association of Manufacturers (NAM), where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews and has appeared on various news outlets, including CNBC. In addition, he is the director of the Center for Manufacturing Research at the Manufacturing Institute, the social impact arm of the NAM, where he leads efforts to produce thought leadership, data, and analysis of relevance to business leaders in the sector.
Prior to joining the NAM, Dr. Moutray was the chief economist and director of economic research for the Office of Advocacy at the U.S. Small Business Administration (SBA) from 2002 to 2010. In that role, he was responsible for researching the importance of entrepreneurship to the U.S. economy and highlighting various issues of importance to small business owners, policymakers, and academics. In addition to discussing economic and policy trends, his personal research focused on the importance of educational attainment to both self-employment and economic growth.
Prior to working at the SBA, Mr. Moutray was the dean of the School of Business Administration at Robert Morris College in Chicago, Ill. (now the Robert Morris University of Illinois). Under his leadership, the business school had rapid growth, both adding new programs and new campuses. He began the development of an M.B.A. program that began accepting students after his departure and created a business institute for students to work with local businesses on classroom projects and internships.
Chad Moutray 0:00
Manufacturing actually has been a bit of a bright spot in the larger economy. That doesn’t mean that we’re out of the woods. We’re clearly not back to pre-pandemic levels of employment or output at this point, but when you compare it to the service sector, we certainly have fared a little bit better. Overall, the manufacturing sector is just down 1% below where it was less prevalent, which is pretty impressive.
Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.
Sam Gupta 0:58
Hey everyone, welcome back to another episode of the WBS podcast. I’m Sam Gupta, your host, and principal consultant at a digital transformation consulting firm, ElevatIQ.
Are we already out of the woods from COVID? Should you be bullish on the economy? How should we plan your investments for this year? Can you comfortably plan for long-term investments? How would the new normal look? What disruptions can you expect in your supply chain? What new consumer trends can you expect? And what workforce changes can you expect? If you are a manufacturer, these are the questions you might have as you plan for 2021.
In today’s episode, we have our guest Chad Moutray who discusses the current economic conditions and manufacturing industry forecast. He also translates economic insight for small to medium-sized manufacturers who may not understand how these issues might affect them. Finally, we discussed several other topics, including supply chain consumer behavior in the new normal pandemic driven with the strength changes due to new administration and much more. Let me introduce Chad to you.
Sam Gupta 2:05
Chad Moutray is chief economist for the National Association of Manufacturers, also known as NAM, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews and has appeared on various news outlets, including CNBC.
In addition, he’s the director of the Center for manufacturing research at the manufacturing Institute, the social impact arm of the NAM, where he leads efforts to produce thought leadership data analysis of relevance to business leaders in the sector. Prior to joining the NAM, Dr. Moutray was the chief economist and director of economic research for the Office of Advocacy at the US Small Business Administration from 2002 to 2010.
Sam Gupta 3:01
In that role, he was responsible for researching the importance of entrepreneurship to the US economy and highlighting various issues of importance to small business owners, policymakers, and academics. In addition to discussing economic and policy trends, his personal research focused on the importance of educational achievement to both self-employment and economic growth.
Prior to working at the GSB. Mr. Moutray was the Dean of the School of Business Administration at Robert Morris College in Chicago, Illinois. Now, Robert Morris, University of Illinois. Under his leadership, the business school had rapid growth, both adding new programs and new campuses. He began the development of an MBA program that began accepting students after his departure and created a Business Institute for students to work with local businesses on classroom projects and internships. With that, let’s get to the conversation.
Chad Moutray 3:56
Hey, Chad, welcome to the show. It’s always great to be on your show, Sam. So nice to be on it.
Sam Gupta 4:01
So just to kick things off, do you want to start with your personal story and your current focus?
Chad Moutray 4:06
Sure, so my name is Chad Moutray. I’m the chief economist at the National Association of Manufacturers. I’ve been at the NAM for ten years now. For those of you who are not familiar with the National Association of Manufacturers, we are 125-years-old, the largest trade association dedicated to manufacturing in the US. And certainly, I think when you think of all of the members that we have a small, medium, and large, pretty much every sector across the country.
It doesn’t have to be necessarily a US company. We have a lot of global companies as well as long as there’s a US presence. The other comment to make is that I’ve had an interesting career. I started my career in academia; I was the Dean of the School of Business at Robert Morris College in Chicago, which is actually now part of Roosevelt University. And my passion there was was not only economics, but I also helped grow the MBA program or start an MBA program while I was there, and then After leaving Robert Morris, I moved over to the US Small Business Administration, where I was the chief economist for eight years. So kind of an interesting career from academia to government to now trade association.
Sam Gupta 5:12
Yeah. And it’s always fun to talk about any of the economic topics because that’s my favorite subject. And it has always been, so I’m super excited to talk about that. But before we do that, we have one of the standard questions that we ask every single guest that we get on our show, and that is going to be Chad, your perspective on growth.
Chad Moutray 5:31
Well, obviously, I mean, I think one of the things that you want to try to do as an overall economy, it’s just to continue to, to grow. I think if we think about Americans and our standard of living, you know, you always hope that your kids have a better standard of living than you do, right.
And so I think the key to all of that really is a growing economy. What can we do to make sure that we continue to grow our overall size of the pie right? Yeah, making investments in research and development and technology, making sure we’re smarter, right? I think continuous growth is important for us as a society, but I’ll certainly as an individual, as well. And all of those things have the tendency to make us richer, but also help us to keep our competitiveness. And so when I think of growth, I think, what can we do as a society to continue to make the pie bigger and to make ourselves better off as a result?
Sam Gupta 6:24
Okay, amazing. That’s a very interesting insight. I want to make sure that my audience understands this. And when we look at these small to medium-sized manufacturers, they are probably not going to have as much knowledge, or I would say, translation of how the global economic factor translates to their own personal interest. So I’m going to ask you a question. Okay. So obviously, the pie has to be bigger. But how does that benefit? Let’s say if I am a manufacturing CFO? How is it going to benefit me?
Chad Moutray 6:53
Well, I think every keep in mind that 90% of the members of the National Association of Manufacturers are also small and medium-sized manufacturers. And so I mean, all of them really are thinking about how can I continue to stay competitive? How can I continue to keep up with China? And in many cases, they are suppliers to the OEM. So those larger companies, right, and so when I speak to many of them, they are very interested in making investments, the right and smart investments in technology that are going to help keep them efficient and productive and competitive.
And so I don’t think the topic of growth is one that is foreign to the small and medium-sized manufacturer, I think that they are very keen on it. I think the challenge that smaller medium-sized manufacturers have is limited resources and limited bandwidth, right. And so they might not have a person who was dedicated to looking at some of these topics, the way that a large company might. And so I think that that is the way I typically think of it is that they are very in tune with what’s actually happening in the overall economy. It’s just a matter of the number of different priorities that are kind of at stake there.
Sam Gupta 7:57
Yeah. And I’m actually gonna give you a story of one of my recent conversations with one of my bank of America counterparts, and he was looking at one of the reports, and what I typically find with the macroeconomic data, and the research base data is there is always a little bit of disconnect, okay, versus what we are hearing in the community versus what the reports are telling us.
So when we looked at the report, it was telling that the manufacturing has grown during the pandemic, and which was eye-opening for me because I actually talked to a lot of sales and manufacturing executives, and I don’t really get the same impression. So what is your perspective with respect to the overall current economic conditions? And do you think that the data that we typically get, let’s say, from the research really translates into what the current SMB is feeling?
Chad Moutray 8:48
So that’s a great question. And just to kind of back up a little bit, yeah, obviously, last February to April, that was really peak to trough in terms of the steep decline that we saw on overall manufacturing activity at the beginning part of the pandemic manufacturing activity overall fell 20.1% over the that two month period, that’s looking just at manufacturing production, we lost more than 1.3 million workers in the sector, those numbers somewhat pale in comparison to when you look at the actual sector by sector breakouts.
The worst sector by far in that two month period was a motor vehicle and parts, which was down at 83.5% in that two month period. So flash forward since, since April, manufacturing actually has been a bit of a bright spot in the larger economy. It doesn’t mean that we’re out of the woods, we’re clearly not back to pre-pandemic levels of employment or output at this point, but when you compare it to the service sector, we certainly have fared a little bit better.
Chad Moutray 9:44
Overall, the manufacturing sector is just down 1% below where it was last February, which is pretty impressive. But we are down about 575,000 workers from where we were this time last year. So again, a number of things, a number of challenges out there, even as we are a quote-unquote, bright spot, what I continue to hear from our manufacturing members.
And this is something that I’m sure that you’re hearing in the companies that you’re speaking with as well, is a large number of supply chain disruptions in the overall sector, they just need, especially in an environment where manufacturing activity has been growing pretty rapidly.
It’s hard sometimes to keep up, especially in the COVID world as a result of the supply chain disruptions. And I guess I would add to that, there’s also a lot of challenges with workforce and getting enough workers, you’ve seen raw material costs skyrocket, especially for steel, and in the construction sector for lumber and a number of other commodities, you’re seeing very rapid increases in producer prices.
Chad Moutray 10:43
And I think those are really starting to have a little bit of a drag on the overall sector. Again, the service sector is faring worse, especially in Europe and other places, but you’re still seeing some lingering challenges that are out there. When it comes to the number one issue that I hear about in terms of our main manufacturers’ outlook survey, it’s once again not having enough talent that that is still the biggest challenge that’s out there.
And I’ve given a long-winded answer, but I don’t think I’ve actually answered your actual question, which is, even though the overall sector is down, just 1% below where it was at the beginning part of the pandemic, there still are a number of sectors which are down by double digits relative to where they were before.
Chad Moutray 11:25
So on a year-over-year basis, manufacturing production, for instance, for metals, is still down, roughly 6%. Right. For a lot of other sectors, even machines you get, you get the idea. This, it’s not as broad-based as you might expect. And so, we still are continuing to hear challenges. On the optimistic side, I do expect that by the time we get to the second half of this year, we will be back to pre-pandemic levels. But not that’s not true forever. One, I do think there’s still gonna be some lingering challenges out there.
Sam Gupta 11:53
Okay, so this is very interesting. And I want to dig a little bit deeper into this. So obviously, you know, some of the sectors are still down. But the overall pie is probably similar to what we had at the pandemic level, right. So there must be some sectors that must be booming at this point in time. So do you have a sense of those sectors that are booming?
Chad Moutray 12:10
So I mentioned motor vehicle imports earlier. They actually have fared pretty well, especially considering that they were down at 3.5%. Last year, at one point last year, overall motor vehicle and parts were up 1.7% in terms of production over the last 12 months.
So that’s a pretty impressive rebound considering what happened early on. The other sectors, obviously food is it’s benefited. Obviously, there’s a change in terms of where people are buying the food, but the overall food and beverage has just fared well, aerospace has bounced back chemicals is another sector. Keep in mind that chemicals include pharmaceuticals.
And so you know, obviously that’s part of the solution. But I think probably the biggest success story, and you know, you and I are talking remotely, I’m not actually looking at you in the eye here is computers, right? The technology and computers, everyone is looking more and more at how technology is changing the landscape. And so I would probably call that the biggest bright spot that’s out there right now. Okay, interesting.
Sam Gupta 13:07
And I’m actually gonna touch on a similar topic, based on your previous comment. And that is going to be you mentioned that manufacturers are always interested in the technology investment, right, from our perspective, and you talk about small to medium-sized business. I mean, we are a small to medium-sized business. We do business in the ERP space.
And obviously, our manufacturers are small to medium-sized businesses as well. So for us, as an executive for us, the economy is going to be what is my lead flow? Okay, so if I look at my lead flow, pre-pandemic level, obviously, it is not the same. So I don’t know if the sentiment is still the same, even though the market is up.
So I don’t really see that the interest in the investment in technology at this point in time among the manufacturing community. I don’t know if it is still the same. Or maybe it is because of the financial systems that they might not be as excited or but I mean, I keep hearing the same story, even in the industry 4.0 space, we don’t have the same lead flow at this point in time.
So, where is the disconnect? You are telling me that the manufacturers are definitely interested in growth, they are interested in the investment in technology, but we are not really seeing the same momentum. So what could be the disconnect here?
Chad Moutray 14:16
I would say is that manufacturers are always looking at and trying to look ahead and say what my facility is going to look like three, four, or five years from now. And as a result of that, do To be fair, I think the investments and technology were taking place well beyond well before the pandemic. So they already were starting to think, okay, what’s going to what is my facility going to look like down the line?
I think what the pandemic changed is now technology is sometimes the solution, right? When it comes to maybe re-engineering your production process with social engineering in mind. It certainly has changed potentially, maybe where there are possibilities for remote work, etc.
But I think the overall trend line is still there in terms of how I can use augmented reality to help train my workforce to be able to do new things. How can I actually incorporate some new form of robotics into the production process that will help keep me competitive, maybe also help me with that social distancing element, but also help to kind of streamline the overall production process?
Chad Moutray 15:18
And so I don’t think the conversation has necessarily changed, in many ways, relative to what it was before the pandemic, I think what you’ve seen happen, there was a survey that PwC did, I think, last May, that said, where companies were pinching pennies and other categories, they still were making investments in technology, largely because they saw that as a growth opportunity down the line, right. We also are currently doing we’re updating our skills gap study that we do with Deloitte every so often.
And I’ve asked a lot of these manufacturing member companies that we’re talking to what is the future of work looks like for your company? How does technology play into that space? And certainly, I think having that continuous learning, having that digitization and data background, I think is a helpful skill to have.
And I think certainly recognizing the future potential of where the sector is going. So I think maybe that’s where the disconnect is. I think, certainly right now, everyone is focused on the here and now, but I think most companies that I talked to are certainly focused on where are they moving down the line? 1-2-3-4-5 years from now.
Sam Gupta 16:22
Okay, so let’s talk a little bit about the workforce as well. Right. So you mentioned that the manufacturers have serious workforce challenges, but at the same time, the unemployment rate is still at a very high rate at this point in time, right? A lot of people don’t have jobs. So why is there a disconnect between these two data points?
Chad Moutray 16:40
So I call this the paradox because you’re right. The unemployment rate is 6.3%. Keep in mind this time last year was 3.5, which was a 50 year low. We have, you know, almost 10 million Americans who are out of work, in terms of the unemployment insurance rates were down 575,000 workers in terms of manufacturing employment, and yet time and time again, when I go out, and I survey our members about what are the top challenges, the number one issue is the inability to attract and retain workers.
To me, the skills gap is a structural problem. We’ve known this problem is going to be happening for the last decade, as long as I’ve been at the NAM. We’ve talked about the skill gap, largely because baby boomers are retiring, right? And there’s the worry out there about where’s that next generation of workers going to come from when they do retire? And so part of that is, I think, a perceptional challenge. I mentioned it a second ago. We’re doing a lot of interviews with companies as part of this Deloitte study. I said to many of them, you know, we have a lot of service sector workers who are out how to work right now, how are you going to get those people who were selling as a cashier or whatever, behind?
Chad Moutray 17:43
Or maybe a burger flipper? How are you going to get them into your shop floor? And the first thing they say is, well, we got to get them interested, right? They’re not thinking of us, right. And so I think that there are these perceptions out there that manufacturing is dark, dirty, and dangerous, which are not true. It’s certainly an enemy in a modern sense.
And yet, people have that stereotype out there. So we’ve got to get them interested in manufacturing in ways that they weren’t before. The second one is that because manufacturing is so technologically advanced, now, you need a different type of worker than we might have before, right? It’s not just a matter of doing the same routine over and over and over again, right? It’s now you need someone who can look at a computer look at you know, be able to understand what the computer spits printing out and spitting out to them, and maybe having some other type of trade or skill that requires some additional work.
Chad Moutray 18:31
So if you’re looking for a different type of worker, and that means that sometimes there’s a skills mismatch there. I guess the last thing I would say is that we as a society think we like to think of ourselves as being very mobile, but the reality is, we are not right.
I like to pick on my family here; I’m from rural Illinois, I have a lot of my family members who would never leave Illinois, despite the fact that there are probably greater opportunities if they were to move and go elsewhere. Right. So sometimes, part of that challenge is that not only do you have a skills mismatch, but you also have a location mismatch, and that is the challenge that we like that we have quite a bit.
Sam Gupta 19:06
Yeah, interesting. So let’s talk about supply chain disruption a bit. So what does it mean to, let’s say, if we talk about manufacturing, CFO, or CIO, so how are these supply chain disruptions translating to their challenges at this point in time, and what can they do to prepare for these disruptions?
Chad Moutray 19:24
Well, I guess the biggest supply chain disruption that you hear about just to kind of pick on some current events is obviously the lack of chips in the motor vehicle sector. Right, and just the huge ramifications that that is having on you know, you’re actually having OEMs major car companies saying that they have to shut down production for a while because they are waiting to catch up in terms of chips, but you see that even on a smaller scale with some other companies as well, some of that in adjusting time production process. If you’re waiting for one supplier to give you something and it’s not there, that really is going to hamstring the entire process.
Chad Moutray 19:58
You might have to shut down for a little while. The other thing that I continue to hear about is, again, kind of in that COVID world, you might just have one or two people who can do a certain task, and maybe one of them was exposed to COVID or potentially exposed to COVID.
Now you’ve got to be flexible with your workforce to be able to handle that load. And so there is this kind of unique challenge out there with number one, the fact that manufacturing is a bright spot right now. But also the fact that you have COVID, kind of underlying that and an adjustment time process. Suppose one of those dominoes doesn’t fall at the right time. That creates some backups along the process.
Sam Gupta 20:35
Okay, amazing. So let’s talk about some of the changes that we are going to see with respect to COVID. So I don’t know if there are going to be any changes in the way we do business. If manufacturers should be changing their business models or the way they interact with their customers, or the way they sell their stuff. Are you seeing any of that insight in your surveys or during your conversations with manufacturers?
Chad Moutray 20:58
Companies are trying to figure out what the new normal looks like? Right. Certainly, we spoke earlier about remote work, I think, yeah, to a large extent. But on the white-collar side of manufacturing, I think many of those people who are working remotely probably will stay remote.
So that certainly is a shift. I think beyond that. I think companies are clearly looking at all what can they do to re-engineer the production process so that there is social distancing so that if this were to ever happen, again, they don’t have to shut down the line, right to be able to make sure that those protections are there, that’s not always possible.
Chad Moutray 21:33
Oftentimes, production requires people to be in close proximity to one another. So that’s certainly something that will likely shift technology could be the solution there to a certain extent, because robotics might be something that could be placed into a kind of help that production process.
And so I do think companies are looking at number one, how can technology be incorporated to help not only with COVID but with any other future thing that might come up? I think everyone that I talked to says that they’re re-evaluating their supply chain. I’m not sure that every company knows what that means. Right? Does that mean that the US is going to benefit from that? Does that mean they’re going to be doing more onshoring? Maybe it might, but I think companies are looking at, again, is a duplication in the production process or in terms of suppliers? Where else can I get parts? If this one is down, or maybe I can move stuff closer to home so I can monitor a little bit better? Right.
Chad Moutray 22:23
So I do think companies are reevaluating their supply chain. To be fair, I think they were already doing that before COVID, largely because of the trade war. So there’s that element. So that’s all on the production side. I think the bigger challenge the manufacturers have is, how has the consumer changed?
Because I think consumers also have shifted their thinking, this has been a huge game-changer, right? I’ll pick on packaged foods here, you know, pre-COVID of it, packaged foods, were kind of starting to lose favor, right, especially amongst millennials. And yet, during this just crisis, as everyone has stayed home, packaged foods have gained favor, right? So if I was selling in the packaged food business without picking on any company, you’d have to ask yourself, is that a trend that’s going to stay?
Chad Moutray 23:06
Are you going to revert back to the way things were pre COVID? And so I do think some trends have changed so dramatically that some of them are gonna stick others might not as many millennials, we’re not buying cars pre COVID.
Now, suddenly, they are because they realized that that that was a way that you could have appropriate social distancing, right. And so I think that there are some definite consumer trends that have shifted, and I think as a manufacturer, you’ve got to figure out which one of those are going to stick post-COVID and which ones aren’t, because you’ve got to be able to be appropriately aligned with. However, those consumer shifts have happened, have moved.
Sam Gupta 23:42
Okay, so let’s talk about a little bit with COVID. I was speaking to one of the persons from the wine industry, and the wine industry has changed completely because now they don’t really have that in-person interaction.
Pre-COVID, what they used to do is they used to go to different restaurants, they used to have this wine tasting event, even at the retail outlets, but they don’t have that anymore. So what they have started doing is they are doing a lot of zoom calls, and you will be surprised. I mean, they are actually shipping the wine packages before the zoom call starts.
So this is a very interesting way of doing business. Have you seen any similar trends? Or have you come across any similar stories because of COVID if any manufacturers have changed the way they were doing business, and that is completely a surprise when your hardback?
Chad Moutray 24:31
Well, I mean, honestly, what you’re describing there is the sales techniques of a lot of manufacturers, right? They were making a lot of in-person sales calls right now. They’re doing all that from home. And so, I think that’s one of the new normals that we hear out there.
If people are moving much more virtual, yeah, I used to be on the road myself, right. If I was giving a presentation, I would be out. You know, pretty much at least once a month, get a meeting with member companies kind of fit getting a sense of what was happening in terms of the overall economy as it relates to what they were seeing.
Now we’re doing all of these briefings virtually right. And so moving into that new normal fact, at some point, we’ll be getting out there and still doing business trips, just because I think there’s value in getting out there and seeing people face to face and seeing what’s really happening on the ground.
But I think that there’s also going to be a trend there that says, hey, we’ve learned that this works, the virtual, and this works, right. And I think you’re gonna see perhaps a lot fewer business trips than what you saw pre-COVID, just because there’s no reason for me to get on the plane and fly 1000 miles or something for a 30-minute presentation when I can do it virtually. So I think that is also what you see in terms of sales calls, etc.
Sam Gupta 25:41
Okay, and what are your perspective on the macroeconomic data? Right, so let’s talk about some of these small to medium-sized businesses, right? I don’t know if any of those really use the macroeconomic data to actually make the decisions. I don’t know if they buy this data from a source.
They might go to, let’s say, a lot of different events, and they might be making decisions based on whatever they are hearing. But number one, should they be using this data for any of the decisions that they are making? Let’s say if they are launching new products? Are they using this data right now? If not, why should they be using this data?
Chad Moutray 26:15
See, most of the manufacturing companies that I speak to, even the small ones, follow what’s happening in the news and in the economy pretty closely. So they know, they’re looking at GDP, they’re looking at the Purchasing index, they’re looking at the employment numbers. And I think that for the most part, those companies are looking at it just from a general gauge of okay, what’s happening in the larger economy.
How does that affect me? Right? Yeah, you’re right. Most of them don’t have an economist. In fact, in many ways, I am kind of their quasi economist as the chief economist at the NAM. And they and they certainly read my Monday’s report.
But I think the value that companies get in looking at macroeconomic data is to look at some just general trends as it relates to sentiment, right? You certainly look at consumer confidence, or what the PMI numbers show what’s happening in terms of what future sales might be. You know, they’re looking at it from that lens.
But I think the other element to that and one to not be forgotten is that they also follow political news pretty closely as well, right? Because I think nowadays, to be a good economist, or to be a good business leader, you’ve got to understand what’s Washington is doing or what the state capitol is doing in your state, because that really affects not just the economy, but certainly, it could affect what’s going to happen down the line for you, right.
So everyone’s looking now at what will the Biden administration do in terms of taxes or regulation, or some type of infrastructure investment or whatever else that might be right. And so, as I’m traveling around, there’s an enormous amount of interest, not just in the economy, but in what’s happening in terms of the policy. And I think to be a good forecaster. You almost have to kind of have a good handle about it.
Sam Gupta 27:57
Yeah, so let’s talk about I mean, that was going to be my next question, man. So it’s segwayed nicely for you.
Sam Gupta 28:05
I know the radio is helping me out. So okay, so let’s talk about the policies and forecasting. So if we look at different sectors, right, and if I’m the manufacturing, CFO of, let’s say, either the metal organization or the motor parts of the position of the machinery organization, so how are these policies going to affect me as the CFO or the CEO?
Chad Moutray 28:25
Well, I think the first thing to say is that this is going to be a really strong rebound year and the economy, right. And I think people know that. I mean, I expect to see 5% GDP growth, right? Okay. I already mentioned to you that I expect manufacturing production to actually break back to pre-pandemic levels, probably before the middle of the year.
So I think that’s nice encouraging signup. So what does that mean? Right, I think when you’re looking at overall policies as well, we already got a stimulus from the end of the Trump administration last year. We’re likely going to get another $1.9 trillion package passed in the coming weeks as part of the Biden administration.
And they’re looking at making some additional investments later this year, likely in terms of infrastructure. And the way that I think of that, I think of that not just as your traditional roads, bridges, that kind of stuff, but also broadband, also probably some green, some green energy, or green grid kind of stuff.
Chad Moutray 29:20
And so if you’re looking at all of these things coming down the pipe, that certainly means an enormous amount of stimulus for the economy, right, which means, if I’m a business leader, that means that my demand is going to be pretty, pretty strong. If I’m selling, for instance, machinery, if there’s going to be a major infrastructure package, you know, that construction companies are going to love that, right?
Steel, all these companies are going to love the fact that you’re going to be making some pretty major investments in the economy into the infrastructure. And so I think that knowing those, I think certainly helps you be able to plan not just for this year, but for next year, knowing that those are possible things on the agenda. So those are positives on the negative side.
There are also conversations about what will happen with tax policy, right? Yeah, in the Trump administration, we had pretty significant tax reform. Most of our companies loved the fact that taxes were lower and much more competitive globally. And the administration has said, at least in their campaign, that they want to raise corporate rates up to 28%. Right.
Chad Moutray 30:17
So what does that mean for you as a company if that were going to happen, and certainly the NAM will be, you know, pushing back against that, but it’s certainly something that’s part of the conversation. And we would also expect a much more aggressive regulatory stance from the part of Washington, again, probably much more akin to what we saw in the Obama years.
So as you’re looking out, not just at the favorable, but you’re also looking out at saying, Okay, what new regulations might be coming down the pipe that could affect my business, not just this year, but next year?
Sam Gupta 30:45
Okay, amazing. So let’s talk about some of the manufacturers and the resources. So obviously, you mentioned that 90% of the manufacturers are probably involved with NAM, right. But I don’t know how involved they are. So and because of that, I don’t know if they are going to be aware of all the resources that they can utilize. So do you want to talk about some of the resources that they can take advantage of, or should they take advantage of?
Chad Moutray 31:08
So I mean, certainly, hopefully, you’re a member of a trade association, right. So obviously, I would be pushing the National Association of Manufacturers. We’re a great nation. But there are also a lot of state associations that, particularly, give us a lot of policies that come from your state government.
Yeah, hopefully, a member of one of those as well. And we actually are affiliated with, you know, a manufacturing Association in every state. So you can go on our website and see who we’re affiliated with. But there also are a lot of vertical associations. So one for steel, another for aluminum, or another one for electronic components, etc.
Chad Moutray 31:43
So we have about 250 vertical associations that we also partner with, right. So that helps expand the overall breadth of our reach. But you know, each of those associations gets much more tailored into either state policy or to regulations or policies that might be more specific to that specific sector, as it relates to the NHS while we’re out there doing people join the NHS, largely because we’re out lobbying on their behalf for tax policy or regulation, regulatory policy, looking at infrastructure investments.
You had a lot of people last year who were looking to the NAM, particularly at the beginning part of the pandemic, for looking for some guidance on how do I continue to make my business deemed essential, right? I bet state governments were closing a lot of facilities or in terms of vaccines, or in terms of other things that are coming out.
Chad Moutray 32:29
So I do think that there’s an enormous amount of intellectual knowledge that our policy leaders have in terms of some of these topics. And the advantage I think that members have of the NAM is that you have pretty instant access to that knowledge, right? People who want to know about the economy will call me, and I’ll pick up the phone, right?
If you’re looking at tax policy, or trade policy, or whatever else, a similar type of knowledge is there on some of those topics as well. So I would encourage folks to go to the NAM website, nam.org. And we can certainly email me as well, and I can hook you up to our membership folks.
Sam Gupta 33:05
Okay, amazing, so that’s it for today. Chad, do what do you have any last-minute closing thoughts for manufacturers?
Chad Moutray 33:10
No, I think what I would say is that I’m bullish about manufacturing as a sector. I think that we’re coming through this pandemic. Obviously, we were hit pretty hard by it.
But I do think that not only are we the bright spot now, but I think that there’s a lot of optimism for the sector moving forward. And if anyone wants to get my regular thoughts on the economy, I would encourage you to either follow me on LinkedIn or on Twitter. I’m at Chad Moutray.
Sam Gupta 33:37
Okay, so my personal takeaway from this conversation is going to be there are there is going to be exciting times, probably the worst is over. So on that note, thank you so much for your time and insight. It was a fun conversation.
Chad Moutray 33:48
Thank you. Hope to do this again soon.
Sam Gupta 33:50
I cannot thank our guests enough for coming on the show for sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you’ll learn something new today. If you want to learn more about Chad, head over to nam.org. Links and more information will also be available in the show notes.
If anything in this podcast resonated with you and your business. You might want to check other related episodes, including the interview with Harry Moser from reshoring initiatives, who discusses how to compute the total cost of ownership of reshoring initiatives. Also, the interview with Amanda Schelede, who discusses how manufacturers and retailers can better manage disruptions associated with COVID spread.
Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to catch you on the next episode of the WBS podcast.
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