US Manufacturers Like What They See -- Especially At Home

US Manufacturers Like What They See -- Especially At Home

Rising optimism about the economy and their business prospects was evident in two surveys of manufacturers released today.

In its quarterly Business Outlook survey, Manufacturers Alliance for Productivity and Innovation (MAPI) announced the composite index, a leading indicator for the manufacturing sector, improved from 67 last quarter to 69, its fifth straight quarterly advance and the highest reading since March 2011, when it was 72.

Optimism about U.S. commerce over the next 12 months rose to its highest level since the fourth quarter of 2005, according to the Q1 2014 Manufacturing Barometer released by PwC US. Optimism rose to 71% in the first quarter of 2014, compared to 68% in the previous quarter and 55% in the first quarter of 2013.

The improvement in the composite index, which is based on prospective U.S. shipments, backlog orders, inventory and profit margins, and in the other indexes charted by MAPI “signal growing confidence that manufacturing activity in 2014 will exceed its 2013 level,” stated Donald A. Norman, MAPI senior economist.

Uncertainty about the economy and domestic policy battles has had many manufacturers sitting on their wallets during the recovery, but that hesitation to invest may be abating, according to the two surveys.

MAPI’s non-U.S. investment index, which forecasts investment abroad, jumped 18 points to 59 in the latest survey. Manufacturing executives also signaled more domestic capital investment as the U.S. investment index rose to 59 from 54 in the fourth quarter of 2013.

Most respondents told MAPI uncertainty was not a factor holding back investment. Some 42% said their companies would increase capital spending in 2014 while 43% said it would roughly equal to 2013.

Industrial manufacturers “continue to indicate consistent near-term spending plans, including hiring more workers, supporting new product development and investing in IT and R&D,” said Bobby Bono, PwC’s U.S. industrial manufacturing leader. 

Growth was clearly on the radar of the majority of manufacturers responding to the PwC survey:

  • 82% expect positive revenue growth for their companies over the next 12 months
  • 56% plan to add employees to their workforce in the coming year
  • 75% are planning to increase outlays for operational spending

Bono noted that uncertainty about the global economy remained elevated for manufacturers, with optimism about foreign markets dropping to 41% from 47% in the fourth quarter of 2013. Still, that was an improvement from the 36% who were optimistic about the world economy a year ago.

MAPI reported that its export orders index, which compares anticipated exports in the first quarter of 2014 with those of a year ago, fell to 60 from 67. But Norman noted that although the export orders index slipped from its December level, it was still above 50, indicating that exports orders in the current quarter were up for most companies compared to their level in the first quarter of 2013.

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