Optimism Continues to Remain in U.S. Industrial Manufacturing
The majority of U.S. industrial manufacturers who were surveyed remain optimistic regarding prospects for the U.S. economy, but sentiment about the global economic outlook continues to weaken, according to the Q2 2012 Manufacturing Barometer released today by PwC US. According to the survey, overall revenue projections among U.S. industrial manufacturers remain positive, with 88 percent of respondents expecting revenue growth at their own companies and only five percent expecting negative results. In addition, 87 percent of respondents said they were planning increases in operational spending in the year ahead.
"Despite the perception by some of the increasing challenges globally, sentiment regarding the direction of the U.S. economy among U.S. industrial manufacturers remained positive during the second quarter," said Bobby Bono, U.S. industrial manufacturing leader for PwC. "Overall spending plans remain healthy with a focus on new product introductions in the face of a competitive environment across multiple sectors. However, we are seeing some moderation in planned outlays for R&D, as well as geographic expansion, which may portend a more conservative approach given worldwide economic conditions."
Although optimism towards the U.S. economy dropped from 70 percent in the first quarter of 2012 to 52 percent in the second quarter, U.S. industrial manufacturers remain largely positive, recording only seven percent being pessimistic and 41 percent uncertain. In contrast, only 13 percent of those selling abroad are optimistic about the world economy, a decline of 31 points from the first quarter. In addition, 20 percent are pessimistic and 67 percent are uncertain about worldwide business prospects.
Notwithstanding the respondents' comments on the global economy, the projected average revenue growth for the year ahead among those surveyed remained at 5.6 percent, consistent with the first quarter survey, but below last year's 6.5 percent estimate. The respondents identified three key barriers to growth during the next 12 months, including legislative/regulatory pressures (58 percent, up 18 points from last quarter), lack of demand (48 percent) and oil/energy prices (48 percent).
In addition, the projected contribution from international sales among companies marketing abroad was 37 percent, relatively constant with the first quarter of 2012.
The majority (55 percent) of U.S. industrial manufacturers surveyed plan major new capital investments in the year ahead, up slightly from the first quarter of 2012. The mean investment as a percentage of total sales remained moderately high at 5.3 percent, but below last quarter's six percent. In addition, 87 percent of respondents plan to increase operational spending, led by investment in new products or service introductions (52 percent) and information technology (50 percent). However, only 35 percent forecast increased spending on research and development, the lowest level since the second quarter of 2010.