PwC’s 1st Quarter Manufacturing Barometer Reflects Increased Optimism

{{RELATEDLINKS}}The majority of the manufacturing executives who are part of the quarterly “Manufacturing Barometer” research conducted by PricewaterhouseCoopers LLP seem to be feeling better about the economy. The report for the first quarter of 2013 finds 55 percent optimistic about the American economy’s outlook for the next year, up from 48 percent the quarter before and definitely better than the past three quarters. Just 5 percent report being pessimistic, and the rest aren’t sure. These execs also are feeling ever so slightly better about the global economy, but that’s not saying much — their first quarter optimism is at only 36 percent.

Overall projections for 12-month revenue growth dropped from 5.2 percent to 4.3 percent. Still, 78 percent do expect at least some increase in revenues, while just 5 percent think revenues will head south. And the surveyed executives will be spending money over the next year — 71 percent expect that their operational budgets will grow and 43 percent plan some major capital expenditures. They’re looking to the future, too, with 52 percent saying they’ll boost their R&D budget, while 38 percent plan to unveil new products or services.

While the research suggests the executives are not as pumped up about acquisitions, it’s no surprise that they’re also less enthusiastic about growing overseas: “Plans for M&A activity were down to 19 percent (off 16 points). Expansion to new markets abroad dropped off 14 points to 9 percent, indicating a slowdown in investments in international markets.”

As for the employment outlook, “new hiring plans over the next 12 months were reported by 45 percent of industrial manufacturers, off 13 points from its above-trend line 58 percent in the prior quarter,” according to the PricewaterhouseCoopers report. The best news is that “only 3 percent are reducing their work forces.” Why aren’t things even better? The respondents list a number of key barriers to growth, and two of the top three have more to do with government policy than economic issues. According to the report, “The three chief headwinds to growth over the next 12 months are legislative/regulatory pressures (55 percent, up 8 points), lack of demand (48 percent, off 4 points), and taxation policies (45 percent, up 12 points).” About a third say energy prices are getting in the way of growth, but that figure is down from the previous quarter.