Workers may want to prepare. According to the Richmond Federal Reserve, companies have been investing in automation and plan to ramp up that shift as inflation persists.
Over the past year, about 60% of companies have automated tasks previously performed by employees, and nearly two-thirds of companies have made it a “strategic priority” to now ramp up automation going forward, the Richmond Fed said the CFO Survey revealed.
The automation that occurred over the past year has come from a combination of software, equipment, and technology. But the Fed said the majority of firms that plan to automate over the next 12 months intend to do so with AI.
And why are companies increasing automation?
The majority, 58%, reported using automation to improve product quality, the Fed noted. Nearly half said the investments are to increase output (49%) and others are using automationto reduce labor costs (47%). Meanwhile, a third of those surveyed admitted that the automation is to substitute for workers.
Automation isn’t just being used for manual labor. Companies are investing in alternatives to employee-handled administrative tasks too, the research found.
“CFOs say their firms are tapping AI to automate a host of tasks, from paying suppliers, invoicing, procurement, financial reporting, and optimizing facilities utilization,” said Duke finance professor John Graham, the academic director on the CFO Survey.
“This is on top of companies using ChatGPT to generate creative ideas and to draft job descriptions, contracts, marketing plans, and press releases,” he added.
The increase in automation comes at a time when the Fed is reporting sluggish manufacturing activity in the Fifth District, which includes Maryland, Virginia, North Carolina, South Carolina, most of West Virginia, and DC.
In June, the Fifth District’s manufacturing activity declined with a notable drop in shipments and new orders, the Richmond Fed reported.
Firms grew notably less optimistic about local business conditions, said the Fed.
But it appears to be a mixed bag of sentiment.
Data suggests companies expect shipments and new orders to improve over the next six months, said the Fed. Although overall optimism remains moderate, small businesses are less optimistic than large companies, the Fed said research shows. And, nearly a third of CFOs said, due to the uncertainty caused by the upcoming election, their companies are postponing, scaling down, delaying, or permanently canceling investments.
On top of that, the Richmond Fed reported that firms in the Fifth District “expected price growth to moderate slightly” over the next year. But the CFO Survey, which looks beyond the District, said a majority of financial executives expect “higher than normal price increases for their products.”
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