A majority of Iowa manufacturers expect increased sales and plan to invest in capital expenditures in the first quarter of 2022, according to the latest Iowa Association of Business and Industry Quarterly Business Survey. ABI sent this survey to its board in late November.

The survey shows that 76% of ABI board members expect sales to expand in the first quarter, up from 70% from the fourth quarter of 2021. Also, 76% of respondents plan to make capital expenditures in the first quarter, which is the same percentage that respondents reported for the last quarter of 2021.

“The consistent reports from Iowa manufacturers about upcoming capital investments show strong optimism for this first quarter of the new year,” ABI President Mike Ralston said in a press release. “The increased expectation of sales to expand in this first quarter of 2022 also shows the demand on our manufacturers is not slowing down.”

About half of ABI’s 1,500 member companies are manufacturers; the association represents nearly every industry in the state.

Expectations for employment growth are slowing. In this latest survey, 50% of respondents expect the number of employees in their business to grow, while the other 50% expect their employee head count to stay the same. The percentage of those expecting employment growth has declined from 56% in the fourth quarter and 72% in the third quarter of 2021.

The ABI board members surveyed are feeling the same economic concerns being raised nationwide, Ralston said. “ABI will continue to address the ongoing issues our manufacturing companies face, which include supply chain pricing and availability, lack of workforce, shifting our companies into the next generation of technology for increased productivity and business development opportunities,” he said.

Ralston reiterated ABI’s support for the state’s Manufacturing 4.0 initiatives, which aim to help businesses remain globally competitive through increased productivity and efficiency, while addressing workforce shortages. Manufacturing 4.0 initiatives that were approved by the Legislature include grant programs for both technology investments and workforce training.

ABI’s release of the first-quarter survey coincided with an encouraging update today from Wells Fargo Economics.

The latest ISM Manufacturing Index recorded its biggest sequential drop in more than a decade, signaling a degree of relief from inflationary pressures from supply chain issues. The prices-paid component and shorter wait times for desperately needed supplies were the two primary drivers of the 2.4-point decline in the ISM manufacturing index to 58.7 in December. The survey is conducted by the Institute for Supply Management (ISI).

“The biggest message from today's report is that the prices paid component plunged 14.2 points in December,” Wells Fargo economists wrote. “Not only was that the largest drop of any sub-component, it also marks the biggest monthly drop in the prices paid measure in over a decade. … Make no mistake, at 68.2, prices are still rising, but it is no longer the scorching hot 82.4 reading seen in November.”