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District manufacturers expect a steady 2023 after a year of moderate growth

2022 Manufacturing survey

January 13, 2023


Joe Mahon Director, Regional Outreach
Manufacturing workers
Jake MacDonald/Minneapolis Fed

Article Highlights

  • Demand and production generally increased in 2022; expectations for 2023 were steady
  • Employment grew somewhat while wages surged; firms expect to increase head counts in year ahead
  • Despite some easing in supply chain pressures, producers reported that they remain a challenge
District manufacturers expect a steady 2023 after a year of moderate growth

Even amid surging input prices and continued supply chain disruptions, Ninth District manufacturers saw continued growth in 2022 and were generally expecting stable conditions in the year ahead, according to a survey conducted in November and December by the Federal Reserve Bank of Minneapolis and the Minnesota Department of Employment and Economic Development.

The survey results reflect responses from nearly 400 manufacturing operations of various sizes randomly sampled across district states. Most survey results can be summarized using an index representing changes in activity from 2021 to 2022, and activity in 2022 versus expectations for 2023 (Figure 1).

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More than half of respondents reported that orders from customers increased in 2022, while production levels, capital investment, and productivity increased on balance as well. As expected given increased inflation, a strong majority indicated they increased the prices they charged for their products. Results for profits and exports indicated contraction from the previous year.  

Employment increased at a third of operations, compared with about a quarter who cut employment. Payrolls may have grown faster if not for labor availability challenges expressed in many survey comments, such as one from a Montana respondent: “Cannot find labor! Increased pay and no workers out there.” This sentiment was consistent with survey results for wages, as nearly half of respondents reported having increased wages by 6 percent or more.

Looking ahead, respondents noted a generally stable outlook for 2023. While manufacturers on balance anticipated expansion across the board in the coming year, a larger share reported no expected change in activity.

More than half of operations expected no change in production levels or in productivity in 2023. Prospects were more subdued for demand—just over a third of manufacturers were expecting increased new orders this year, compared with more than a quarter who expected them to decrease. The outlook for prices remained elevated, with a slight majority of respondents expecting to raise their selling prices further.

More than a third of manufacturers expected employment to increase at their operations in 2023, while 19 percent anticipated layoffs. On average, wages and benefits were expected to increase less than last year.

For the second year in a row, an additional question on the survey asked about the impact of supply chain disruptions on operations. Despite some easing, challenges generally persisted, though the picture varied depending on the source of the disruption (Figure 2). Labor issues and transportation and logistics remained significant challenges and generally got worse for most respondents, as did raw materials availability. However, production process issues improved and COVID-19 issues became less of a hurdle.

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In contrast to the steady outlook among manufacturers for their own operations, expectations for state economies in 2023 were pessimistic. On balance, respondents expected state employment, business investment, consumer spending, and corporate profits to contract over the next 12 months. Inflation remained the largest concern, with 70 percent predicting an increase in the coming year.

Manufacturing survey data

Ninth District: 389 Responses

Business indicators in 2022 compared with 2021
  Up Same Down Diffusion index*
Number of orders 51% 24% 25% 63
Product/service production level 45% 36% 19% 63
Employment level 33% 42% 26% 53
Investment in plant/equipment 43% 41% 16% 64
Selling prices 81% 13% 6% 87
Profits 28% 34% 38% 45
Productivity 28% 49% 23% 53
Exports 10% 71% 19% 45
Expected business indicators in 2023 compared with 2022
  Up Same Down Diffusion index*
Number of orders 35% 38% 27% 54
Product/service production level 33% 51% 16% 58
Employment level 32% 49% 19% 67
Investment in plant/equipment 31% 47% 22% 54
Selling prices 53% 34% 12% 70
Profits 28% 42% 30% 49
Productivity 34% 53% 13% 61
Exports 13% 73% 14% 49
What is your outlook on the following state economic indicators during 2023?
  Up Same Down Diffusion index*
Business investment 23% 46% 31% 46
Employment 23% 48% 30% 47
Consumer spending 12% 38% 51% 30
Inflation 70% 20% 10% 80
Corporate profits 15% 37% 48% 34
Compensation in 2022
  Decrease 0% 1%–2% 3%–5% 6%–10% >10%
Wages per worker 3% 6% 7% 39% 27% 18%
Benefits per worker 4% 26% 12% 29% 19% 10%
Expected compensation in 2023 * Values above 50 indicate expansion; values below 50 indicate contraction. The index is computed by taking the percentage of respondents that reported "up" and half the percentage of the respondents that reported "same."
Percentages may not add to 100 due to rounding.
Source: Federal Reserve Bank of Minneapolis and Minnesota Department of Employment and Economic Development
  Decrease 0% 1%–2% 3%–5% 6%–10% >10%
Wages per worker 2% 6% 7% 57% 13% 4%
Benefits per worker 1% 22% 21% 35% 14% 7%
Joe Mahon
Director, Regional Outreach

Joe Mahon is a Minneapolis Fed regional outreach director. Joe’s primary responsibilities involve tracking several sectors of the Ninth District economy, including agriculture, manufacturing, energy, and mining.