Industrial Manufacturers Are Optimistic About Global Economy

But not so positive about the domestic economy.

Up from 69% last quarter, 83% of industrial manufacturers are optimistic about the global economy over the next 12 months. The same is not true of the domestic economy, with only 57% of those surveyed expressing optimism.

"Higher levels of optimism about the world economy were reported among senior executives, supported by increased international sales and an expected increase in geographical expansion, including new markets," said Barry Misthal, PricewaterhouseCoopers' industrial manufacturing sector leader.

According to the report, over half (59%) of executives are increasing their international sales and are expecting 33.9% of their total revenues to come from abroad during the next quarter.

Additionally, 56% of executives cited plans for major new investments of capital over the next 12 months, with the level of planned investments rising to 7.4% of revenues -- compared to 6.5% in the previous quarter. Nearly half (44%) of all industrial manufacturers are investing in geographic and facilities expansion, with 39% of manufacturers considering expansion into new markets abroad.

Hiring will also increase for 2007, with 46% planning to add net employees to their workforce over the next 12 months. However concern about lack of qualified workers abounds.

Looking at the growth rate, a slowing is projected for the year-end of 2007 in the manufacturing industry, off notably from an average of 4.4% in the prior quarter to 3.1%. The leading barrier for growth continues to be oil and energy prices.

Lack of demand also remains a negative factor cited by 36% of executives along with a concern over legislation or regulatory pressures (also 36%).

There were also more cost and price increases during the first quarter of 2007. Fifty-one percent of industrial manufacturers cited cost increases and 39% raised their prices. Looking out over the upcoming year, only 21% considered decreased profitability as a potential barrier to company growth.

"Overall, this quarter's data seems to support that notion that the world economy is not anticipated to turn down, while the U.S. economy stays soft," said Misthal.

For access to the complete Manufacturing Barometer report, please visit http://www.pwc.com/mb


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