2023 – Threading the Needle Between Recession and Growth
By Frederick Baehner, IBNewsmag.com Publisher
While many economists are forecasting recession in 2023, IBNewsmag.com initiated conversations with a few small to medium-sized enterprise (SME) manufacturers and service providers who expect more moderate sales growth this year.
Much of the SME growth may be attributed to the shift towards reshoring operations, which we covered in last month’s issue of IBNewsmag.com, to increased operations resilience while decreasing transportation costs to meet the on-going demand for “Made In The USA” products along with the recent weakening of the dollar against some foreign currencies.
It may also be the result of the nature of SME manufacturers, which tend to be more niche-oriented with a keen eye on market opportunities.
Smaller companies' outlook tends toward growth.
A case in point is a South Dakota company that we featured two years ago – Prairie AquaTech. In a conversation with CEO, Mark Luecke, he indicated that his company, which is being renamed due to much of this growth, should see significant growth this year.
Prairie AquaTech continues to focus on its ME-PRO, a fermented plant-based protein ingredient for Atlantic salmon, shrimp and sea bass food to improve the health and growth of these edible sea creatures.
The company sells directly to food processors across the globe including Europe and Latin America. “We’ve extensively tested and sold the product in Panama, an important shrimp harvesting country,” said Mr. Luecke. Currently, the company is concentrating on Latin American markets, one of the largest shrimp markets in the world.
In addition, Prairie AquaTech has branched out to the pet food market along with testing its enriched soybean products in human food products. This prompted the name change from Prairie AquaTech to Houdek, based on its state soil source for growing soybeans.
“We anticipate continued growth in each of our markets throughout 2023 and beyond,” noted Mr. Luecke, pointing out that this expectation looks beyond the seafood and pet markets to human foods as well. Potential partners are looking to Houdek to increase its manufacturing capacity. Soybean meal is a key ingredient of products for all of these markets and is becoming increasingly available due to the high demand for soybean oil used in renewable diesel.
BioMicrobics is another SME that foresees some moderate sales growth this year. This company, based in Kansas, sells, installs and manages its equipment domestically and exports to international markets. It is a global leader in advanced wastewater, greywater and stormwater treatment systems for sustainable water management. So far, it has exported to some 80 countries.
Bob Rebori, President of BioMicrobics, takes a pragmatic view of 2023. “While some of our domestic business will drop off, our commercial business is growing,” he said. The commercial business means he larger wastewater systems rather than those sold for smaller residential housing installations.
BioMicrobics serves a number of markets with the following water management solutions. They include Residential Wastewater Solutions, Community Wastewater Solutions, Marine Solutions, Water Solutions, Stormwater Solutions, Greywater Solutions and others.
“On the international front,” he continued, “a lot of projects we have worked on the last several years during the pandemic are being funded and released, so we feel good about some international growth.”
Purchasing managers are looking to a much softer year ahead.
The Institute for Supply Management (ISM), in its December Report on Business, claimed that economic activity in the manufacturing sector contracted in December for the second consecutive month following a 29-month period of growth.
Its Purchasing Managers Index (PMI) regarding the overall economy, indicated contraction after nearly 30 straight months of expansion. The Manufacturing PMI figure, in particular, was the lowest since May 2020.
It consists of a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting. The purpose of the PMI is to provide information about current and future business conditions to company decision makers, analysts, and investors.
“Continued weakness in European economies and China’s economic sluggishness continued to constrain new export order activity, which negatively impacts new order rates,” said Timothy R. Fiore, ISM Chair.
Creighton University’s monthly survey of manufacturing supply managers in a 9-state Midwest region is flashing recession warnings for 2023. “Not since April and May of 2020, the middle of the 2020 recession, has the overall index fallen for two straight months,” said Ernie Goss, PhD, director of Creighton University’s Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics in the Heider College of Business.
Creighton’s overall Business Conditions Index has now declined for seven of the past nine months. “Approximately 60% of supply managers expect the economy to slump into a recession in 2023,” said Prof. Goss.
Fred Baehner, Publisher