Sales are down or flat at 81 percent of the 340 manufacturers surveyed by Wipfli LLP, and profits are pacing even worse with 86 percent expecting them to drop or stagnate, according to the Milwaukee-based national advisory and accounting firm's 2024 Harbour IQ benchmarking study.
About a third of those surveyed — 107 companies — are in the plastics industry, including processors, mostly injection molders but some blow molders and extruders, too. Toolmakers, die-casters and stamping companies also were among the companies surveyed in May for the benchmarking study, which has been conducted annually since 2016 to assess performance and outlooks across manufacturing.
In the plastics segment, processors are posting slightly better sales with 79 percent describing them as down or flat, but slightly worse profits with 87 percent saying they dropped or haven't moved.
Tooling shops are having a tougher time. Ninety percent are seeing flat or falling sales, and 86 percent are experiencing flat or falling profits.
"In today's market, volume is down — 10 percent to 30 percent for some companies. The economy is soft. People are not buying as many durable goods like appliances, cars or Sea-Doos," Laurie Harbour, a Wipfli partner and former owner of Harbour Results Inc., said in a phone interview.
The tooling side also faces another challenge: competition continuing from low-cost countries.
"Companies in places like China are quoting and winning work at prices that the North American toolmakers cannot meet," Harbour said. "We've lost shops. We've lost capacity. It's becoming much more challenging for toolmakers to survive in today's environment."
Die-casters are in a similar position, losing work to China, India and Mexico, she added.
Over the past two decades, capacity utilization has decreased 18 percent at tooling shops and 33 percent at die-casting shops compared with a 15 percent reduction in overall domestic manufacturing capacity utilization. Or, to put another way, capacity utilization remains low for both production — stampers, die-casters and plastic processors — and tooling industries at 55 percent and 71 percent, respectively.
Harbour said many survey respondents are experiencing a return to pre-pandemic sales levels at a time when higher labor costs and inflation are hitting almost every line of the income statement from resin pellets to toilet paper.
"It has definitely been very slow the first eight months of the year, and it feels very recessionary," Harbour said.
Overall, feedback from manufacturers is gloomy. Sentiment has been declining pretty steadily since 2021, and it edged down again between quarters this year.
In the first quarter of 2024, 50 percent of respondents were optimistic. The number dropped to 31 percent in the second quarter. Meanwhile, 11 percent of survey-takers were pessimistic in the first quarter. That number increased to 22 percent in the second quarter.
The top concerns are the higher cost of doing business, continued inflation, upward wage pressures, rising energy costs and fears of a U.S. recession.
"It's the economy," Harbour said. "We had this burst of durable good demand during COVID. Everybody's home. Everybody bought appliances. They redid their house. They bought cars. Now we've got high interest rates and high inflation. Wages have not kept the pace of inflation, and now people are in debt. They can't afford big durable goods."