Even though the U.S. economy continued to expand in 2024, the manufacturing sector stacked another down year. But new survey results show an optimistic year ahead for Ninth District manufacturers. As one Michigan manufacturer commented: “2023-24 were tough! Looking forward to 2025.”

Manufacturing activity decreased for the second year in a row according to the survey, conducted by the Federal Reserve Bank of Minneapolis and the Minnesota Department of Employment and Economic Development at year-end. Those same survey respondents had very optimistic outlooks for their firms in 2025.

Survey results reflect responses from 487 manufacturing operations of various sizes randomly sampled across district states. Most survey results can be summarized as an index representing expansion or contraction over the previous year, and expectations for the coming year (see Figure 1).

Falling demand was the primary driver of weak manufacturing activity. More than half of respondents reported that orders from customers decreased in 2024, compared with a quarter who saw increased orders. Profits, production levels, and exports decreased as well. In positive news, both productivity investment in plant and equipment increased on balance, though just barely.

Nearly half of manufacturers said they increased the prices charged for their products from a year ago. However, profits fell on balance, indicating that lower demand and higher input costs outweighed increased prices.

Employment at regional manufacturers declined in tandem with demand and production. A third of respondents decreased headcount at their locations, while 16 percent increased staffing. Nearly 60 percent reported that labor availability was unchanged, a notable contrast to years of reports of overwhelmingly tight labor conditions. Wage pressures also eased. A majority of firms reported raising wages by 3 to 5 percent in 2024, and more than a quarter raised wages by less than that.

Yet even after a rather negative year, manufacturers said they expect a strong rebound in 2025. Overall, they anticipated growth in every business indicator in the year to come, and in particular for demand: Nearly half of respondents said they expect orders to increase. Outlooks for productivity, profits, and production levels were also quite strong, and investment was expected to increase as well.

Not only did manufacturers expect their sales volumes to increase, but they also anticipated the prices they charge to their customers to go up. In a possible warning sign for inflation, 42 percent of respondents said they expect to raise their selling prices further compared with only 9 percent who expect them to decrease.

A substantially higher proportion of respondents said they plan to add to their workforces in 2024 than those who anticipated layoffs, though the majority of respondents expected no change. Present labor market conditions were projected to remain stable, as 73 percent forecast no change in worker availability. On average, wages and benefits were expected to increase at a somewhat slower pace than last year.

When asked about investment in automation, more than half of manufacturers said they had not increased the use of labor-saving technology at their firms in the last year. Among firms that were increasing automation, the most-cited reasons include mitigating labor shortages and reducing labor cost, along with increasing productivity (see Figure 2).

The rosy outlook for business operations extends to state economies. On balance, respondents said they expect state employment, business investment, economic growth, and corporate profits to expand over the next 12 months. However, the outlook for consumer spending was slightly negative. This could be due to expectations for persistent price pressures, as more than a third of manufacturers predicted increased inflation in the coming year.