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Optimism Toward U.S. Economy Continues to Rise for U.S. Manufacturers

May 02, 2012, 06:30 AM
Filed Under: Economy

U.S. industrial manufacturers expect continued global economic growth in 2012, with optimism regarding the prospects for the U.S. economy continuing to rise, according to the Q1 2012 Manufacturing Barometer released by PwC US.

Optimism regarding the broader world economy also improved, but only moderately as uncertainty remains prevalent across the globe.  Reflecting the overall rise in sentiment, more companies plan to hire employees in the year ahead, while a majority forecast increased investment spending.  In addition, companies are reporting improved profitability and decreased concerns regarding barriers to growth, despite volatile oil/energy prices worldwide and ongoing concerns regarding legislative/regulatory issues, among other factors.

Optimism regarding the prospects of the U.S. economy during the next 12 months rose 40 points among industrial manufacturers, to 70 percent in the first quarter of 2012 from 30 percent in the fourth quarter of 2011.  The gain follows considerable fluctuation in sentiment during the past year, including the historically low level of optimism of five percent, recorded in last year’s third quarter.

Investment Spending

Regarding investment spending, 82 percent of panelists plan increased capital outlays in 2012, driven by new product or service introductions (52 percent), information technology (47 percent) and geographic & facilities expansion (42 percent each).  The mean investment as a percentage of total sales rose from the fourth quarter’s moderate 4.2 percent to a robust 6.0 percent in the first quarter of 2012 – indicative of continued spending among the majority of panelist participants.

Industrial manufacturers are also increasingly turning to technology innovation to improve their business models and processes.  Over the next one to two years, more than 90 percent of panelists plan to implement new technologies to meet the needs of consumers, customers and employees to support digital transformation.

“Optimism regarding the U.S. economy among U.S. industrial manufacturers improved markedly during the first quarter of 2012, while views of the worldwide economy remain guarded, improving only modestly due to continued high levels of uncertainty.  The positive gains in sentiment, primarily in the U.S., have been buttressed by higher forecasts for own-company revenue in 2012, as well as perceived decreases in barriers to growth.  Moreover, margins remained positive, aiding confidence levels and supporting plans for hiring and investment,” said Barry Misthal, global industrial manufacturing leader for PwC.  “Following a prolonged period of streamlining and cost-cutting during the economic downturn, there is no question that companies have achieved efficiency gains, while balance sheets improved measurably.  Hence, management teams are increasingly focusing on strengthening their product offerings and competitive positioning, as well as evaluating global expansion strategies through both M&A and new facilities building.”

To read the full PwC Q1 2012 Manufacturing Barometer press release, click here. 

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