Suppliers' business outlook improved now that U.S. election over

Original Equipment Suppliers Association mood had been down for two quarters

Charles Chesbrough, OESA's chief economist

Now that the emotional 2016 U.S. presidential election is behind them, North American suppliers say their business outlook is improving for the first time since the second quarter of last year.

But, with Washington considering to rework U.S. trade treaties, they still are keeping an anxious eye on what will happen next, according to a new survey by the Original Equipment Suppliers Association.

The OESA includes Canadian suppliers like Magna International, Linamar, Valiant and more.

The outlook is a break from recent months, according to Charles Chesbrough, OESA's chief economist. Supplier mood for the past two quarters had been falling as manufacturers were apprehensive about the presidential election and worried about consumer spending. 

But suppliers probably will stay in a more cautious mood over the next few months as they hear more specifics about the Trump administration's trade policies, Chesbrough added.

The threat of trade policies change ranked as the No. 1 concern to suppliers in the latest OESA Supplier Barometer, a quarterly survey of North American parts company executives. The industry outlook, released last week, indicates widespread concern over the prospects of a border tax on Mexican-made products and renegotiation of the North American Free Trade Agreement.

Suppliers recognize they "are going to need to develop contingency plans, particularly around trade policies," Chesbrough said of the feedback.

Other top concerns among the companies were political tensions in Washington and shortages of skilled labour, an issue that has been a thorn in the side of suppliers for years.

Chesbrough predicted that those labour issues will linger for the next few years, both for salaried and hourly positions.

"There's just limited availability," he said. "It's starting to hold back expansion plans. Suppliers just don't have [the] labour."

The barometer put the mood of the North American supply base at 54 out of 100 on the index -- up from 48 in October.

The number is significant because it is the first time the score is above the neutral level of 50 since the second quarter of 2016. The higher the number, the more confident the suppliers.

"We can look at the outlook and say that the election is behind us," Chesbrough said. "But there's still a tremendous amount of uncertainty." 

You can reach Jack Walsworth at jwalsworth@crain.com -- Follow Jack on Twitter: @jackwalsworth

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