There is greater optimism over the U.S. economy in 2013 and much expectation of revenue growth in the next 12 months, according to the latest read on the U.S. industrial manufacturing sector by PricewaterhouseCoopers.
In the consultancy’s Q4 2012 Manufacturing Barometer, 83 percent of 57 senior executives at large, multinational U.S. industrial manufacturing companies who responded to PwC are forecasting revenue growth at their companies, versus 3 percent who are forecasting negative results. They are forecasting an average 5.2 percent revenue growth, which was higher than the average 4.6 percent growth expected back in Q3 2012.
The C-suite respondents, however, limited their encouraging expectations to the domestic market, as their optimism of international markets remained low at 32 percent and uncertainty high at 53 percent.
“Overall sentiment among U.S. industrial manufacturers regarding the prospects for the domestic economy rose,” said Bobby Bono, U.S. industrial manufacturing leader at PwC. “The improved sentiment regarding the domestic outlook contrasts with the continued high level of uncertainty concerning the international stage. Management teams are placing their bets on the U.S. economy as they seek avenues to strengthen their competitive positions and foster growth.”
A Kick in Hiring and Capital Investment?
The greater good feeling could translate to more hiring and spending over the next 12 months among industrial companies. Fifty-eight percent of PwC respondents noted they intend to hire sought-after technicians, skilled laborers, and production workers, while 7 percent are mulling reducing their full-time headcounts. Forty-seven percent said they plan major capital investments over that same time frame — though this number still pales to the 67 percent of PwC respondents who said the same thing in Q4 2011.
The average investment as a percentage of total sales was 5.3 percent, going toward facilities expansion (with just 17 percent saying overseas facilities), new products and services, and R&D. Moreover, some investments might go toward M&A activities, as 32 percent of Barometer respondents are looking to purchase another business, while 13 percent are looking to sell part or all of their businesses.
Still, there are things that might be keeping these execs awake at night. They expressed concern about lack of demand (52 percent), legislative/regulatory pressures (47 percent), oil and energy prices (42 percent), and taxation policies (33 percent) as being barriers to growth for the next 12 months. Worries over decreasing profitability rose by 9 points from Q3 2012 to 30 percent of PwC respondents.
And while overseas expansion has slowed, the vast majority of these respondents (87 percent) are already doing business in the BRIC countries, especially China (79 percent), with India and Russia expected to receive more activity from U.S. industrial manufacturing businesses.
Gross margins rose moderately in Q4 2012; they were higher for 35 percent of panelists and lower for 22 percent of respondents. Costs and prices rose moderately, as well, as 35 percent reported higher costs and 17 percent reported lower costs. A quarter of the surveyed businesses raised prices, while 15 percent lowered them.
The feedback from the 57 C-level members was given to PwC from early October 2012 to mid-January. The complete Manufacturing Barometer report is at PwC’s site.