Manufacturer's survey shows positive signs for Minn. economy

Executives from about 90 percent of Minnesota's manufacturing sector think that we have passed the threat of another recession, and more than half of them expect to see sales grow this year.

Those are just a couple of the findings from a new survey of the state's manufacturers by Enterprise Minnesota, a nonprofit consulting organization helping small and medium-sized businesses grow.

According to the state Department of Employment and Economic Development, there are nearly 9,000 manufacturing establishments in the state. About 11 percent of all non-farm jobs in Minnesota are in manufacturing, which accounted for $16 billion in wages -- or nearly 14 percent of all wages -- in 2009.

In the second quarter of 2010, there were 291,000 manufacturing jobs in the state.

The Enterprise Minnesota survey is based on phone interviews conducted in January with 400 manufacturing executives. It has a margin of error of plus or minus 4.9 percentage points.

Rob Autry, the pollster behind Enterprise Minnesota's third annual survey, spoke with MPR's Tom Crann about the survey.

Tom Crann: According to what you've found this year, is it safe to say that manufacturing in Minnesota is on an upswing?

Rob Autry: I absolutely think it's safe to say that. This is the third year in a row we've done the survey among 400 manufacturing executives across the state, and the previous two years we found executives optimistic, but guarded in their optimism.

I think what's different about this year's survey is that their optimism is pretty well grounded. They're less likely to believe we're heading into recession. In fact, we found that 4 out of 10 believe that 2011 will be a year of economic expansion for them.

Then when you ask them about the projections in their own business, whether it's gross revenues, profitability or even capital expenditures, more and more executives believe they're likely to see increases this year, especially compared to what we saw in the last two years.

Crann: Are all the state's manufacturing sectors optimistic this year?

Autry: Yes, they are. There are some differences by size of the company or revenue of the company, but for the most part these were pretty universal findings.

Crann: Can you give me a couple of quantifiable positives as you look at the survey?

Autry: I think what is very useful about this data is to compare where we were two years ago with the same audience. If you go back to our first survey in 2009, we had over half of the executives -- 56 percent -- believing that we were heading into an economic recession. Today it's less than 1 out of 10. Also two years ago, we only had 8 percent of executives who believed we were heading is an economic expansion. Today that percentage is at 40 percent.

When we ask them about key projections for their own business, we have 51 percent who believe gross revenues are going to increase in 2011, 39 percent expect their profitability to go up this year. And one out of three said they are even expecting capital expenditures to increase in 2011. If you go back to 2009, only 23 percent expected their gross revenues. Today it's more than doubled to 51 percent.

Crann: From this survey, what can you say about the overall health or robustness of Minnesota's manufacturing economy?

Autry: There is a sense that we may be at the storm's end here. When you look at the data, executives believe the economy is turning around, and they're much more likely to believe that their own business is turning around.

Crann: Where do you see areas of concern? It can't all be rosy.

Autry: Executives aren't without worries, that's for sure. We asked about a series of factors. For the third year in a row, the cost of health care coverage tops the list of concerns among manufacturing executives. We found that 71 percent of executives cite the cost of health care coverage as a major concern to their business, and that's up a little bit from what we saw last year. ... Based on what we saw in the survey and what we've heard in the focus groups, I think this issue is going to be around for a while.

Crann: A big issue with a new Legislature and new governor is taxes and tax rates. Often, critics of higher taxes say it hurts the business climate. Do you have any data around taxes or tax rates or concerns about them?

Autry: We've identified in the survey three main issues that were the top-tier concerns. Besides health care and the cost of health care coverage, government policies and regulations and federal, state and local taxes were in that top tier of concerns for executives. Whereas 71 percent rated the cost of health care as a concern, 61 percent of executives rated government policies and regulations as a concern, and over half -- 56 percent -- said taxes, whether at the federal, state or local level, were a concern to them and their business.

Crann: Were there any surprises in this data?

Autry: One was the difficulty that manufacturers were having in attracting qualified candidates. Forty-five percent said they were having difficulty. I thought that was a little high. And also the other point on constriction of credit. The question we asked two years ago followed up last year, and what we found this year is still about a third -- 36 percent of manufacturers -- said their firm had experienced a constriction of credit in 2010. And among those who have, they continue to say it's having a significant impact on their business.

(Interview transcribed by MPR reporter Elizabeth Dunbar. MPR's Bill Catlin and Sam Choo contributed to this report.)

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