Outlook: Optimism about U.S. Economy Rises for Industrial Manufacturers - Modern Distribution Management

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Outlook: Optimism about U.S. Economy Rises for Industrial Manufacturers

Fourth-quarter Manufacturing Barometer from PwC shows significant rise in optimism on U.S. economy, continued uncertainty on global conditions.

Optimism among industrial manufacturers about the U.S. economy's prospects over the next 12 months rose from 27 percent to 48 percent, according the fourth-quarter Manufacturing Barometer Business Outlook Report, a quarterly report from PricewaterhouseCoopers. Even more promising, only 7 percent indicated they were pessimistic about the outlook for the U.S. The remaining 45 percent were uncertain.

The outlook for the global economy, however, was much less optimistic. Only 32 percent of respondents said they were optimistic, up 3 percentage points over last quarter.

Overall, industrial manufacturing executives raised their own-company 12-month revenue growth forecasts by a half-point, from 4.6 percent to 5.2 percent; 83 percent expect positive revenue growth and only 3 percent forecast negative growth. International sales remains strong despite uncertainty about world markets, contributing 38 percent of total revenues.

Several potential barriers to growth emerged in the latest survey, along with concern about demand, legislative/regulatory pressures, and oil/energy prices. Lack of demand remains the most-mentioned barrier to potential growth over the next 12 months, but is off 15 points to 52 percent. Close second is legislation/regulatory pressures at 47 percent (up 3 points), followed by oil/energy prices (42 percent). Rising sharply this quarter is concern about taxation policies, 33 percent (up 10 points), along with concern about decreasing profitability, 30 percent (up 9 points). Also higher is pressure for increased wages, 18 percent (up 11 points).  

The majority of industrial manufacturing panelists are planning net new hiring over the next 12 months, up 11 points to 58 percent. A year ago, it was at a low 37 percent. Only 7 percent plan to reduce the number of full-time equivalent employees, and 35 percent will stay about the same. Overall, workforce projections are 0.5 percent, similar to last quarter’s 0.7 percent, as many more employers intend to hire but are hiring in moderation.

Forty-seven percent of U.S. industrial products manufacturers surveyed plan major new investments of capital over the next 12 months, slightly below last quarter (49 percent). Their mean investment as a percentage of total sales is 5.3 percent, below last quarter but above a year ago.

Increases in operational or budget spending was cited by 80 percent, with IT and facilities expansion higher. Geographic expansion was the same at 28 percent. Plans for marketing and sales promotion were higher, 18 percent (up 4 points).

Gross margins were moderately higher in the fourth quarter of 2012; costs and prices were also moderately higher.

More details from the fourth quarter Manufacturing Barometer are available from pwc.com.

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