Signs point to optimism in U.S. small manufacturing sector: analyst

A leading manufacturing sector economist sees “beginning stages for some optimism” in the small business community which, in turn, indicate “solid” economic news for many U.S. manufacturers in 2011.  

“The small business community drives the economy and is vital to any sort of real recovery,” said Dr. Chris Kuehl, economic analyst for the Rockford, Ill.-based Fabricators & Manufacturers Association, International (FMA). “In manufacturing the connection is even more obvious as 95 percent of manufacturers employ fewer than 500 workers and half run operations of less than 100 employees.”

Citing the U.S. National Federation of Small Business Optimism Index that rose by 2.7 points and now sits at 91.7, Kuehl identified a mood of optimism in the small business community in an article that appeared in the current FMA newsletter. “That is certainly progress and there are some movements in the sub-index that look more promising yet,” he said. “There is an expectation that demand will increase as the expected sales increase jumped by 4 percentage points – marking the first positive movement in that sub category since the start of the recession in 2008.”

Kuehl identified three factors that must occur in the small business community for a recovery to occur: consumer demand must return, businesses need access to capital to meet that expanded need, and business owners will require a semi-predictable environment in order to plan how to grow their businesses.

Although Kuehl sees progress happening in each of these three fronts during the next year, he also cautioned against over-optimism. “It is solid news that there has been a change in attitude – at least the beginning stages of some optimism. If this holds for a few more months, it will be appropriate to get more excited about that build in confidence,” he said. “None of the data suggests there is euphoria in the community, however, and the numbers are well below what used to be considered normal. The bottom line is that conditions are improving but slowly, and there is no real sense that there will be dramatic recovery much before the end of next year, at the earliest.”