The Global Manufacturer

The Critical Shortage Facing US Manufacturers

Optimism is on the rise among US manufacturers, according to the latest quarterly PwC Manufacturing Barometer, but one critical shortage is still bedeviling the manufacturing community – the lack of skilled workers.

More than three out of four (77%) manufacturers told PwC they had a need to fill certain skill gaps over the next 12 to 24 months. Half the companies surveyed said they had open positions they were unable to fill with skilled workers.

The skills gap continues even as manufacturers report a sharp uptick in their hiring plans. Some 58% of manufacturers plan to add employees over the next year, up 16% from the last quarterly survey conducted by PwC.

Rising optimism about the global economy and sales is helping fuel the hiring plans. The survey found 82% of U.S. manufacturers expect to see their revenues increase in the next 12 months. Some 60% are optimistic about the U.S. economy, while 40% expressed optimism about the global economy (up from 31% in the prior quarter).

While their outlook on the world economy is improving, manufacturers actually expect the contribution to revenue from international sales to drop slightly from 32% in the last survey to 30%.

“The divergence in viewpoints regarding the U.S. and world economic outlooks narrowed somewhat in the third quarter. Optimism regarding the global economy improved, but uncertainty remained prevalent, marked by persistently low expectations regarding the level of international revenue contributions going forward,” said Bobby Bono, U.S. industrial manufacturing leader, PwC. “Despite the uptick in global economic sentiment, the U.S. remains the growth driver in the industrial manufacturing sector, with continued signs of healthy demand, pricing strength, new product investment and hiring. Overall top line growth expectations remain moderate and management teams are continuing to take a careful approach to capital allocation and cost management, while preserving liquidity.”

Manufacturers reported plans for increased spending on capital investments (48% compared to 40% last quarter) and operational spending (78%, up five points). While 55% said they expect to spend more on new product or service introductions, increased expenditures are also planned for research and development (38%) and information technology (35%).

But here’s the caution in this tale of economic optimism. It’s largely based on the U.S. economy performing as expected.

“If the US economy stumbles, then absent some outperformance in global economic output, we could see a breakout of more negative sentiment,” PwC warns.

That means what happens in Washington over the next 72 hours could have a critical impact on the manufacturing community’s fortunes for the next year or longer. The outbreak of sunny optimism could quickly be replaced by the cold chill of uncertainty and even fear.

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