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Manufacturers Less Optimistic About Overall Economy; Express Confidence in Their Own Revenue Growth

In mid-July, PwC released its Q2 2016 Manufacturing Barometer, which surveyed senior executives at U.S.-based industrial manufacturing firms to determine their assessment of the direction of the nation’s economy, as well as their projections for their companies’ future economic performance.

The results reveal that only 35 percent are optimistic about the U.S. economy in the year ahead — down from 42 percent in the first quarter and 69 percent in Q2 2015. This represents the lowest level of optimism since the fourth quarter of 2011, when it was 30 percent.

When asked for their assessment of the world economy, just 29 percent expressed optimism — up from 24 percent in Q1 2016, but down from the 38 percent expressing optimism about prospects for the world economy in Q2 2015.
A heightened sense of caution has led to a generally conservative approach to hiring. Bobby Bono, Industrial Manufacturing Leader, PwC
According to Bobby Bono, PwC’s U.S. Industrial Manufacturing Leader, industrial manufacturers are adjusting “to a more difficult macro-economic climate globally.” Additionally, says Bono, “A heightened sense of caution has led to a generally conservative approach to hiring.” Only about a third (32 percent) of U.S. industrial manufacturers expect to increase hiring — down from more than half (52 percent) who said they expected to increase hiring in the Q2 2015 survey.

Despite this, more than three quarters (78 percent) of the surveyed industrial manufacturers say their own companies are expecting positive revenue growth in the year ahead. Bono says, “This tells us that management teams believe in their products and their ability to compete, which makes sense given the sustained focus on new product investment and R&D that we have seen through this period of uncertainty.”

Some 43 percent of U.S. industrial manufacturers surveyed do plan new investments of capital during the next 12 months, 9 percentage points above the Q2 2015 investment plans, but 10 percent lower than those expressed in Q1 2016. Increased expenditures will focus on introducing new products or services (52 percent), R&D (40 percent), information technology (30 percent), facilities expansion (20 percent), and marketing and sales promotion (20 percent).

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