Manufacturers upbeat on economy, but cautious as to growth
By Staff -- Manufacturing Business Technology, 5/1/2005 12:00:00 AM
U.S. manufacturing executives are more optimistic than their counterparts in other sectors about prospects for the U.S. economy in 2005, according to a recent Manufacturer's Barometer report from New York-based PricewaterhouseCoopers.
Based on interviews conducted, 82 percent of manufacturing CEOs—as opposed to 78 percent of those from all industries—are upbeat about U.S. prospects over the next 12 months. The outlook reflects an uptick in optimism of 4 percentage points from last year.
But as Jorge Milo, leader of PricewaterhouseCoopers' manufacturing practice, points out, "While they have a slightly higher optimistic view of the U.S. economy, when you view estimates of growth for their own companies, manufacturers put it at 7.8 percent for the next 12 months, whereas last quarter, they estimated growth at 9 percent. Looking at all companies, the estimate went from 10.4 percent in the third quarter of 2004 down to 9.6 percent in the fourth quarter."
Milo theorizes that while there is a favorable view of the U.S. economy, "Those executives are cautiously optimistic over the 12-month horizon," he says. "Competition from foreign markets, energy and oil prices, and the monetary exchange rate all put a bit of caution in their viewpoints."
Although the number of industrial manufacturers expecting new hiring rose sharply to 53 percent, this remains below the consensus view of 57 percent. Industrial manufacturers now expect to grow their workforce by an average of 0.8 percent over the next 12 months—off from a high of 1.7 percent estimated in the prior quarter, and well below the increase of 2.4 percent expected by their cross-industry colleagues.
With regard to major new investments in manufacturing, estimates fell from 55 percent in the third-quarter survey to 45 percent in the fourth quarter, compared with a drop from 55 percent to 50 percent among all sectors.
"Industrial manufacturers have a more conservative view of the future, including reductions in projected revenue growth, and plans for new hiring," says Milo. "Adjustments appear to be tied to heightened concerns about one or more of the growth inhibitors of relevance to this sector."
Estimates for investments, however, are higher among manufacturers than in all other sectors in several key areas, including IT (50 percent versus 49 percent); new product/service introductions (45 percent versus 41 percent); and R&D (40 percent versus 28 percent).
