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Two months into 2025 and there has already been some turbulence for the business community, especially manufacturers, who often rely on imports and exports. Are the long-anticipated tariffs here?
The Trump administration recently acted upon its campaign promises and ushered in a series of tariffs on goods from Mexico, Canada and China. While there’s been a quick pending reversal of these orders on two of the target nations, many business leaders continue to worry over their company’s performance in the face of such economic circumstances.
In a rare occurrence, Chief Executive’s latest CEO Confidence Index poll fell in January (it’s only happened five times in the poll’s 22-year history) with the majority of CEOs citing tariffs and unexpected policy initiatives as the reasons for their apprehension.
The same holds true for CEOs in manufacturing. Their 12-month forecast for business conditions dropped by more than 1 percent in Q1 (for the second time in 10 years) and is down more than 2 percent from its high in November, when the election led to a 10 percent jump in their forecast. However, their 6.8 out of 10 forecast for future business conditions (on a 10-point scale where 1=poor and 10=excellent) is still one of the highest in the past year, albeit dampened slightly by tariffs and a bit of political uncertainty.
“I am anticipating conflicting forces. Continued reshoring initiatives will drive domestic investment and a new administration who is promising deregulation are both causes to be optimistic. Conversely, tariffs will be inflationary causing bond markets to remain elevated increasing the cost of money, making investments more difficult to justify,” says Dan Culbertson, president of Omni Technologies, a polyurethane components manufacturer. He highlights the cautious optimism of many manufacturers.
To prove that hopes are higher than they may seem, the Q1 poll revealed that more than 90 percent of manufacturing CEOs forecast revenue growth over the next 12 months—an all-time record. This is compared to 75 percent of executives in other industries who forecast revenue growth for the year. Manufacturing profit forecasts remain notably high, with 79 percent reporting anticipated growth, the highest proportion in over a year, compared to other organizations. Additionally, a majority (53 percent) of manufacturing CEOs are projecting increases in hiring and capital expenditures in 2025.
The reasons for the slight drop in confidence are clear, but the strong revenue and profit forecasts are fueled by customer demand, incoming deregulations and a pro-business administration, as stated by several of the manufacturing CEOs who participated in our Q1 CEO Confidence Index survey.
“There is continuing strong customer demand in the face of macro headwinds,” says Jeff Silverstein, CEO of California Faucets—a sentiment echoed by many others.
While a high proportion of companies are projecting revenue growth this year, growth in previous years has been more complex and scattered than Q1 polls indicate. Since 2022, when Chief Executive’s annual Financial Performance Benchmarks survey began tracking annual growth, manufacturers have not always been at the front of the pack when it comes to revenue growth. This year, however, marks a turn into growth, especially for consumer manufacturers, who may have faced strong headwinds in previous years.
After a strong year in 2021, when 83 percent of consumer manufacturers reported revenue growth, likely due to robust consumer demand, it was quickly tampered by rising costs on everything from materials to labor, supply chain challenges and a particularly difficult labor market—especially for manufacturers.
These are the same reasons why industrial manufacturers reported a similar pattern from 2021 to 2023: The proportion of companies reporting revenue growth was on a decline, which was not mirrored by other industries that were less affected by remote work mandates, supply chain issues and the labor market. Then in 2024, a rising proportion of both industrial and consumer manufacturers began to report revenue growth and are now projecting growth at better rates than companies in other industries.
The average projected revenue growth rate for manufacturing companies for 2025 is significantly higher than that of other companies overall, with industrial manufacturing reporting 8.2 percent growth, consumer manufacturing reporting 8.5 percent growth and the overall figure at 7.6 percent for the year.
As for EBTIDA, data shows that Covid and its associated challenges really affected the bottom line for manufacturing companies, but recovery was strong in 2023. Since then, manufacturing profits have outperformed the median overall margin by about 1.5 points yearly.
2024 marks the positive trend of margins increasing on a yearly basis, with both consumer and industrial manufacturers reporting a 2 percent climb from 2023 to 2024, both beating the overall median margin of 13 percent. Projections for 2025 are also positive for manufacturers, with both industrial and consumer manufacturers projecting a higher median than companies in other industries, at 11 percent, 12 percent and just 10 percent, respectively.
The CEO Confidence Index is America’s largest monthly survey of chief executives. Each month, Chief Executive surveys CEOs across America, at organizations of all types and sizes, to compile our CEO Confidence Index data. The Index tracks confidence in current and future business environments, based on CEOs’ observations of various economic and business components. For additional information about the Index and prior months data, visit ChiefExecutive.net/category/CEO-Confidence-Index/
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