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PwC: Manufacturers Optimistic Regarding Economic Outlook for 2014

January 24, 2014, 07:00 AM
Filed Under: Manufacturing

With expectations that economic growth will continue in 2014, U.S. industrial manufacturers expressed optimism about the U.S. economy, and more importantly, toward the broader world economy, which has reached the highest level since the fourth quarter of 2010, according to the Q4 2013 Manufacturing Barometer, released by PwC US. Looking ahead, respondents appear poised for growth as a majority expect positive revenue gains at their own companies; plans for hiring remain steady; international sales regain momentum; and the headwinds to growth begin to level off.

Optimism regarding the prospects of the U.S. economy during the next 12 months rose among U.S. industrial manufacturers to 68 percent in the fourth quarter of 2013, from 60 percent in the previous quarter. Compared to the fourth quarter of 2012, 20 percent more of the executives surveyed are now optimistic about the domestic economy.

“Optimism regarding the U.S. economy continued to increase in the fourth quarter, while views of the worldwide economy, although improving, remain divided given continuing levels of uncertainty. Our Global Manufacturing Current Assessment and Outlook indices tell us that executives are generally more positive in regard to the economic environments in which they operate, but aren’t seeing significant improvement in financial results to make large investments in their businesses,” said Bobby Bono, U.S. industrial manufacturing leader, PwC. “As we continue to see the global macroeconomic environment improve, we expect U.S. industrial manufacturing executives, bolstered by strong balance sheets, to more aggressively compete for businesses in international markets and increase capital expenditures.”

According to the latest Manufacturing Barometer, overall sentiment about the world’s economic prospects among U.S. industrial manufacturers who market abroad also increased in the fourth quarter of 2013, rising to 47 percent from 40 percent in the third quarter and 32 percent in the fourth quarter of 2012. While nearly half of survey participants expressed optimism, an additional 46 percent remain uncertain about global prospects and seven percent remain pessimistic.

Reflecting the increased confidence level about the worldwide economy, international revenue regained upward movement in the fourth quarter of 2013 as 29 percent of respondents reported increased international sales, up from 18 percent the prior quarter. “The expected contribution of international sales to total revenues over the next 12 months also showed a slight tick upward. The rise of global optimism may signal increasing contributions as these international marketers see an improving economic picture in Europe and in emerging markets,” continued Bono.

Underscoring the increased confidence levels overall, 85 percent of survey respondents expect positive revenue growth for their own companies in 2014, with 13 percent forecasting double-digit gains and only three percent expecting negative growth. The projected average revenue growth rate for own-company revenue over the next 12 months increased to 5.4 percent in the fourth quarter of 2013 from 4.2 percent in the previous quarter.

Plans for operational spending in 2014 dipped slightly; 73 percent of U.S. industrial manufacturers planned on increasing operational spending during the fourth quarter of 2013, a decrease of five percent from the third quarter. Over the next 12 months, the leading increased investment areas include new product or service introductions (45 percent), research and development (37 percent) and information technology (32 percent). Twenty-three percent of respondents planned M&A activity in the year ahead, focusing on purchasing another business, sale of part/all of own business or a spin-off. In addition, expansion into new markets abroad increased slightly to 20 percent with eight percent citing plans for new facilities abroad, which was offset by 10 percent planning to close/reduce facilities overseas.

To read the full PwC Q4 2013 Manufacturing Barometer, click here.

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