PricewaterhouseCoopers (PwC) has just released its Q3 2012 Manufacturing Barometer, which is based on interviews with 57 senior executives of large, multinational U.S. industrial manufacturing companies about their current business performance, the state of the economy, and their expectations for growth over the next 12 months.
Among the report’s major findings —
- Manufacturing executives are uncertain about both the U.S. and the global economies.
- A lack of demand is cited as the biggest barrier for growth.
- And while hiring and investment plans remain stable, plans to expand overseas have decreased.
Yet, despite continued uncertainty about the prospects of both the U.S. and global economies, the majority of U.S. industrial manufacturers remain positive regarding the overall revenue outlook for the next 12 months. Eighty-two percent of respondents forecast revenue growth at their own companies for the next 12 months, while only 9 percent expect negative results. However, the projected average growth rate for own-company revenue over the next 12 months dropped to 4.6 percent from 5.6 percent in the second quarter, and below last year’s 5 percent estimate.
Nonetheless, many of the respondents (47 percent) plan to hire new employees over the next 12 months, up five points from the previous quarter. Only 7 percent plan to reduce the number of full-time equivalent employees. The most sought-after employees are expected to be professionals/technicians (33 percent), production workers (25 percent), and skilled labor (21 percent).
Some 49 percent of respondents also plan major capital investments over the next 12 months, slightly below last quarter and a year ago (55 percent). As for new business initiatives, PwC found that plans for expansion into new markets abroad dropped to 23 percent in the third quarter from 37 percent in the second quarter, representing the lowest level since the fourth quarter of 2009. In addition, plans to invest in new facilities abroad also dropped considerably to 16 percent in the third quarter, down 16 points from 32 percent in the second quarter.
“While the majority of U.S. industrial manufacturers continue to forecast revenue growth at their companies over the next 12 months, overall sentiment among those surveyed remains cautious toward the direction of both the U.S. and global economies,” said Bobby Bono, U.S. industrial manufacturing leader for PwC. “Margins remained flat during the third quarter and inventories rose, while concerns rose regarding a lack of demand as a barrier to growth. There was also a notable pullback in capital and operational spending plans for overseas expansion. These factors may point to the continued uncertain global climate and a more guarded approach being taken by industrial manufacturers.”
Optimism regarding the 12-month outlook for the U.S. economy dropped to 37 percent in the third quarter of 2012, down 15 points from 52 percent in the second quarter, but remained well above the record low levels during the same quarter of 2011. Meanwhile, sentiment regarding the 12-month outlook for the world economy among manufacturers who market abroad remained low at 29 percent, although this level improved by 16 points from 13 percent in the second quarter. Still, the majority of respondents (54 percent) expressed uncertainty regarding the 12-month outlook for both the U.S. and global economies.
Pwc’s Q3 2012 Manufacturing Barometer also surveyed the executives at the large, multinational U.S. industrial manufacturing companies specifically about their companies’ supply chains, i.e., concentration, assessing risk, and plans for improvement. Nearly 40 percent said half of their supply chain was concentrated in one specific region; 62 percent said they assess supply chain risks multiple times a year; and 72 percent plain for either moderate or minor supply chain improvements in the coming 12 to 18 months. Among the steps they are implementing are business continuity and disaster recovery plans (81 percent), using multiple suppliers for critical materials (77 percent), and using multiple facilities for key production processes (68 percent).