In the latest survey by KPMG International, 41% of U.S. manufacturing executives expect employment to increase, up from 28% in October.

With regard to inflation, the percentage of manufacturing executives expecting to see increases in inflation doubled to 45% from 22%.

As far as improved business activity, 68% of manufacturing executives expect improved business activity, compared with 57% in October.

The survey found that sentiment among U.S. executives about increases in revenue, profits and business activity has generally rebounded from a dip in October.  However, it is important to note that the survey was taken prior to the events in Japan, and the findings also only partially reflect the impact of recent Middle East and North African unrest.

"While the impact of these events is a challenge to predict, our survey found businesses leaders have clearly shifted focus from cost cutting to growth in a post-recession environment, though some remain cautious about hiring and are not convinced improved business conditions will result in higher prices," said U.S. vice chairman Mark A. Goodburn at KPMG LLP. "This is consistent with the continued emphasis on increased productivity we’re seeing throughout the marketplace, as businesses work to leverage new operations and IT models that improve efficiencies within their organizations.

"With stronger optimism around business activity and with many businesses still sitting on cash reserves, there may be positive momentum, but increasing payroll continues to be a significant hurdle as companies look for ways to improve their operations with adding to headcount," Goodburn said.

Higher Revenues and Profits Expected

The survey showed 65% of U.S. manufacturing executives expect higher revenues, up from 52% in October, and a similarly strong 57% of U.S. service sector executives believing revenues will increase, up from 47% in October.

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