Although a majority of industrial manufacturers surveyed for the PwC US Manufacturing Barometer report are optimistic with regard to revenue this year, they do see high oil and energy costs as potential barriers to growth.

Looking at the next 12 months, 57% of industrial manufacturers expressed optimism about the U.S. economy, down 6 points from the fourth quarter of 2010, but 4 points higher than the same period in 2010. Uncertainty about the U.S. economy was cited by 38% of panelists, an increase of 8 points, while only 5% remain pessimistic versus 7% last quarter.

Forty-four percent of panelists were optimistic about projections for the 12 month outlook for the world economy, a decline of 16 points from the fourth quarter 2010. The majority (51%) are uncertain, up 13 points, while only 5% are pessimistic about the global economic outlook.

In the first quarter of 2011, 65% of respondents believed the U.S. economy was growing, up 4 points from the final quarter of 2010. For the first time in five years, no panelist believed it was declining. Thirty-five percent believed the U.S. economy did not change from last quarter.

A surge in oil and energy prices contributed to 65% of respondents citing oil and energy prices as the greatest potential barrier to own-company revenue growth over the next 12 months, rising 38 points from the fourth quarter as the cost per barrel of oil surged above $100. The increased price of oil and energy surpassed legislation and regulatory pressures (54%), which had topped the list of barriers for the past year. Concerns about demand plummeted 22 points to 41% and concern about a lack of qualified workers rose for a second quarter, up 12 points to 25%.

The projected average growth rate for own-company revenue over the next 12 months rose to 7% in the first quarter of 2011 from 6.6%in the fourth quarter of 2010. The Q1 2011 rate more than doubles the 3% projected average growth rate reported in the first quarter of 2010.

Eighty-nine percent expect positive revenue growth for their own companies in the year ahead, an increase of 14 points over first quarter 2010 and 5 points over the fourth quarter. Thirty-three percent are forecasting double-digit growth, a significant increase of 21 points over first quarter 2010, while 56% are forecasting single digit growth. Only 5% forecast negative growth and another 2% are forecasting zero growth.

In the first three months of 2011, a majority (51%) of U.S.-based industrial manufacturers reported higher costs, and 8% reported lower costs for a net plus 43%. Forty-three percent raised prices, and only 11% lowered them, for a net of plus 32%.

U.S.-based industrial manufacturers that sell abroad continued to grow revenue in the first quarter of 2011, with 59% reporting an uptick in sales, while 39% responded that sales remained the same over the prior quarter. Only 2% reported a decrease. The projected contribution of international sales to total revenue, however, declined to 34 percent from the prior quarter's 38%, possibly a reflection of growth in domestic revenue.

Other highlights of the survey:

  • 49% are planning new investment of capital. The increase marks the fifth straight quarterly increase in spending projections.
  • 86% will increase operational spending . The spending plans are led by new product or service introductions (49%), R&D (46%), business acquisitions (41%), and IT (41%).
  • 51% will add employees to their workforce over the next 12 months. Only 3% plan a net reduction, while 46% will stay about the same.
  • 40% are maintaining a larger cash position than they typically do. Over the next 12-18 months, 83% of those holding more cash foresee using it for acquisitions, joint ventures, increased hiring, R&D, facilities expansion and IT projects. Seventeen percent plan to hold on to their cash.

See Also
Increased Demand is Fueling Manufacturer Optimism