The latest Iowa Association of Business and Industry Quarterly Business Survey shows continued optimism among the 1,500 organizations it represents.
ABI President Mike Ralston says businesses are not wavering despite some tough economic conditions.
“What we see from the respondents in the survey is the business people are still pretty confident in the state of the business cycle,” Ralston says. ” It’s been pretty constant that somewhere around half expect to hire. And that’s the same in this survey, it’s also been pretty constant that somewhere around half expect their sales to grow. That’s pretty constant.”
There was one thing in the survey that Ralston didn’t expect. “The big surprise was that 70% of those who responded expect to make a capital expenditure in the third quarter — and that’s huge,” he says. He says capital spending now is huge in the face of high inflation, the high cost of materials, and the trouble getting get materials on time.
“So that means a multimillion-dollar piece of equipment, a plant expansion, something that’s going to involve all those strings. So they’re pretty confident, number one in the state of their business that they can afford to make an investment like that. And number two, they obviously must feel like they need to make it to continue to grow. But either way, it’s a good thing for I would see those kinds of expenditures happen in the third quarter this year,” according to Ralston.
Ralston thinks some of the potential capital spending is to deal with the worker shortage. “They’ve got to make sure they have the latest equipment, the most high-tech processes, and this also could be related to robotics. manufacturers are adding robots wherever they can,” he says. “They’re certainly not letting anybody go. They’re adding them because they can’t find enough workers.”
He says the pandemic has caused businesses to sort of change the way they handle inventory. “Everybody has heard about just in time inventory, where folks would only manufacture products, when there was an order. But what manufacturers have found, since the pandemic is that when they do that, they’re not able to get the parts they need on time to make those orders,” Ralston says. “And so what they’ve done is they order more parts than they need. Or they also make more finished products so that they have it on the shelf or in the warehouse or on a lot somewhere so that they can ship it when they need to.”
Ralston says they’ve got a little increase in inventory costs — but it’s better to be able to fill that order in the end and get paid. Around half of the ABI members are manufacturers