The association also cited rising healthcare costs (69.4%) and an unfavorable business climate (62.4), which could be affected by taxes and regulations, as part of their concerns in the third quarter.
The percentage of respondents who were "somewhat negative" nearly doubled to 29.6 percent in the third quarter up from 15.8 percent in the April-June quarter.
"The Congressional Budget Office has already warned that falling into the fiscal abyss will mean a recession next year, and manufacturers are not optimistic that Washington will be able to set us back on track in time," Moutray said.
"Unless Washington takes bold action to address the economic and political uncertainty and puts in place a pro-growth business climate, we can expect to see more dismal economic growth and pessimism from manufacturers."
There is clear reason for concern as lawmakers have yet to carve out a way forward on the possible tax hikes and spending cuts that will go into effect if Congress doesn't act before the end of the year.
House Speaker John Boehner (R-Ohio) said Tuesday that he wasn't confident that Congress and the White House could arrive at a deal.
The general consensus, at this point, is that lawmakers will provide a short-term fix and seek a broader agreement next year, after the new Congress and administration is in place.
In the first quarter, manufacturing activity was strong, with nearly 89 percent of manufacturers saying they were either somewhat or very positive about their company’s outlook.
This fell to 83 percent in the second quarter, and is now down to 69 percent.
After leading the modest economic recovery, the manufacturing sector has contracted for three straight months behind domestic pressures along with the continuing fiscal crisis in Europe and slowing growth in Asia, including China, resulting in less demand for U.S. goods.
The NAM survey was conducted among 514 manufacturers in a variety of industries and of various sizes.