As the economy struggles to gain momentum, 57% of manufacturing executives are cautiously optimistic about the outlook for the next six months and nearly two-thirds (70%) are planning to keep staff levels steady, according to a survey by Baker Tilly, the 17th largest CPA firm in the U.S.

While many executives are guardedly positive, the level of optimism is shallow and there are deep pockets of pessimism, especially among small companies, according to the new survey. Executives are more pessimistic about the outlook for the manufacturing sector than the economy with slightly less than half (47%) expressing optimism. The key factor dampening the manufacturing outlook is the lack of customer demand, which was cited by nearly half of respondents (45%) as the greatest challenge to the expansion of their company.

"The deep uncertainly about the economic outlook is reflected in the manufacturing sector, which is divided on prospects for the rest of 2009," said Brad DeNoyer, partner and manufacturing industry lead at Baker Tilly. "Many manufacturers see reasons for cautious optimism but there is a pervasive 'wait and see' attitude regarding demand. The good news is manufacturers plan to delay more layoffs as long as possible, but they will need to find a way to aggressively cut costs if customer demand does not rebound soon."

Economic Outlook

While nearly six in ten manufacturing executives have a positive outlook for the U.S. economy for the next six months, the optimism is guarded and the pessimism is deep. A smaller percentage (9%) is very optimistic as compared with those (15%) who are very pessimistic.

Manufacturing executives are more pessimistic about their own sector than the overall economy. Again, the level of pessimism is deep rooted. Only 3% are very optimistic about the sector outlook while 16% are very pessimistic.

Executives from small manufacturers are significantly more likely than medium- and large-firm executives to have a very pessimistic outlook on both the U.S. economy and the U.S. manufacturing sector. The major regional difference is that Midwest executives are more likely than Southern to have a very optimistic outlook.

About half of executives (49%) said they expect their firm's performance to decline, with 12% of those executives saying their firm is in danger of failing. Executives from small firms (14%) were much more likely to report a danger of failing than those from medium (2%) or large firms (3%).

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