Manufacturing in the Pittsburgh region is poised for another good year if the effects of potentially going off the fiscal cliff are minimized.
A biannual survey of manufacturers in southwestern Pennsylvania conducted by Alpern Rosenthal found that about 70 percent have seen revenue increases over the past three years, up from the 51 percent who said the same thing when the last Biennial Regional Manufacturing Survey was conducted in 2010 during the recession. But, as Alpern Rosenthal noted, 85 percent of the region's manufacturers said that in the 2008 survey.
The survey, from Alpern Rosenthal and the University of Pittsburgh's Institute for Entrepreneurial Excellence, paints a picture of optimism among manufacturers about business prospects, but concern over what is going to happen to the economy thanks to the ongoing fiscal cliff saga and the potential steep budget cuts. Ninety-three percent of manufacturers surveyed said they would see increases in revenue in 2013. But only 15 percent think it'll be more than 20 percent.
"Most of our region's manufacturers have had pretty successful years in 2012 from an operations perspective," said Alpern Rosenthal's Larry Barger, who conducted the survey. But as the survey was in the field, Barger said that there were headwinds building in the fourth quarter for both manufacturing and the economy at large.
Those headwinds include the state of the domestic economy, prospects for international business with the fiscal woes in Europe and a slowdown in China, and the looming steep budget cuts from sequestration.
"Most of them are very cautious as they move forward," Barger said.
That caution means that businesses aren't able to plan ahead and budget for growth. It's causing either delays or pull backs in hiring and capital expenditures, Barger said.
"Manufacturers have become more efficient (since the recession), and they've been able to weather that economic storm, they've been able to succeed coming out of that," Barger said. "But they've become cautious in spending, too."
There are other positives from manufacturers in the Alpern Rosenthal report. At least a third of the manufacturers surveyed said they were working on significant business related to the Marcellus Shale natural gas play, up from 20 percent in 2010.
Barger said he thinks that in two years, when the survey is done again, the number of companies that are working on Marcellus Shale business will grow again.
But the Marcellus Shale has also fed into manufacturers' concerns that their challenges to getting a steady stream of employees is already being constricted by the natural gas boom. More than 25 percent of manufacturers surveyed feel that way, compared to only about 12 percent who said that in 2010. Sixty-seven percent of manufacturers see a moderate or severe shortage in workers, and nearly half (48 percent) said they were trying to hire.