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Most Manufacturers Say They’ll Continue Hiking Prices Into 2023 As Inflation Persists.
Inflation has been rising, and if the expectations of manufacturing CEOs is an indication, it’s not going to let up soon. In a recent poll by Forbes, Xometry and Zogby, 87% of them said they’ll hike prices in 2023.
The poll of 150 manufacturing CEOs surveyed in late August found that nearly half of companies (45%) had passed on the costs of inflation to customers today, while 38% said they had avoided doing so and 17% said their companies absorbed the costs despite the financial hit. With inflation running above 8% in August, the vast majority of executives polled who had passed on the costs of inflation (80%) said that they increased their prices between 5% and 15%. Twelve percent said they hiked prices between 15% and 20%.
Those price increases had an impact. More than half (55%) said they had lost customers over the past year due to price increases, while nearly one in five (19%) have cut their workforce to keep costs in line.
The poll comes as persistent inflation has cut into Americans’ pocketbooks and created political peril for the Biden administration. The expected price increases by executives of companies with manufacturing operations indicate that the inflationary climate is unlikely to recede quickly.
How likely are you to raise prices in 2023?
In which year were you hit harder by supply-chain disruptions?
Which of the following measures or innovations has your company taken to be better prepared for another supply-chain disruption?
(Respondents may choose as many as apply)
How likely do you think it is that there will be a recession or an economic downturn over the next year?
The executives’ outlook was gloomy. Nearly two-thirds (65%) said a recession or economic downturn was “definitely” (27%) or “very likely” (38%) coming over the next year. An additional 27% said a downturn was “somewhat likely.” Only 8% said a recession or economic downturn was unlikely.
Despite this, the majority of companies (79%) said they planned capital increases over the next one or two years. And more than half (55%) said they increased wages over the past year, with 16% of them increasing pay by 10% or more.
With supply-chain disruption dominating the economic headlines with factory shutdowns in China, more than one-third (36%) said they were “severely” impacted by supply-chain disruption, while more than half (59%) said they were disrupted but able to manage the difficulties. Product components were scarce, and more than three-quarters (77%) said they experienced shortages. Nearly three-quarters of all executives (74%) said they would be severely impacted by another supply chain disruption in 2023.
Asked their biggest challenges regarding supply chain disruptions, executives ticked off a litany of troubles: getting the raw materials and supplies to keep production going, finding reliable suppliers, delayed shipments, price increases and reliance on foreign suppliers. “It has been tough with Chinese suppliers,” said one. “Paying the gouged prices on materials that are available,” said another, noting that some needed materials had more than doubled in price. “Our margins are under pressure as costs creep up throughout the supply-chain network,” said a third.
In better economic news, the executives said that supply-chain disruptions were improving. Overall, 59% said they were harder hit by disruptions last year, while 41% saw a bigger impact this year. Larger firms (with more than $100 million in revenue) were even more likely to say 2021 was the more difficult year, with 63.5% being hit harder in 2021 than 2022.
Technology? While the majority of CEOs say they are investing in automation for workflow or operations (66%) and artificial intelligence (65%), less than half (42%) said they were investing in robotics for future supply-chain shocks. Not surprisingly, larger companies were more likely to make such investments, with 71% of firms that had $100 million or more in revenue investing in automation and 46% doing so in robotics, compared with 63% and 39% for firms with less than $100 million in revenue.
The Biden Administration’s push to bring semiconductor manufacturing back to the U.S. has led to a crop of new chip plants in the works, led by Intel’s massive $20 billion fabrication facility near Columbus,
Ohio. For executives in our survey, there were also indications of reshoring, with 28% saying that they were reshoring and an additional 29% saying they were nearshoring, or bringing factories closer to home markets. However, more respondents said they were investing in their workforce (68%) or in technologies like automation (66%) and AI (63%) than they were nearshoring or reshoring due to supply shocks.
The poll, a joint effort of Forbes and publicly traded on-demand manufacturing marketplace Xometry, powered by veteran polling firm John Zogby Strategies, aimed to gauge how manufacturers have been handling an environment of rising costs, shortages and supply-chain difficulties.
The margin of error on the poll was plus or minus 8.2 percentage points. Since executives are a tiny segment of the population, a sample size greater than 100 is considered more than representative.