Manufacturers Expect Sluggish Year

Survey shows manufacturers plan to scale back growth projections.

Two-thirds of U.S.-based industrial manufacturers are pessimistic about the U.S. economy over the next 12 months, according to the third-quarter edition of the PricewaterhouseCoopers LLP Manufacturing Barometer. Ninety percent of survey respondents believe that the U.S. economy declined in the third quarter, up 13 points over last quarter and a 70 point increase from those who felt negative about the U.S. economy the same time last year.

As for international prospects, the majority of manufacturers (80%) believe that the global economy declined -- only 13% view the world economy as growing, which is a fraction of the 81% who believed it was growing last year. Of those manufacturers who market their products abroad, 63% are worried about the prospects of the international economy over the next 12 months, a 36 point rise from last quarter.

"Anxiety over faltering credit markets has spread the world over as economic concerns extend beyond the U.S. and impact global economies," says Barry Misthal, partner and industrial manufacturing sector leader at PricewaterhouseCoopers. "Executives are more cautious than ever before and look towards the future with newfound fears and trepidation in the global economy."

U.S. manufacturers are scaling back growth projections for own-company revenue, forecasting a 2.8% average 12-month revenue growth rate in the third quarter -- a 24% decline from the 3.7% growth projection stated last quarter.

On the upside, 45% of respondents who market their products internationally reported an increase in sales from abroad, and 42% retained the same level of international sales during the third quarter. However, this is off considerably from second quarter results, when 66% of manufacturers reported an increase in international sales. Over the next year, international sales are expected to contribute 32% to total revenues of those manufacturers selling abroad, down from 38% in the prior quarter.

"Declining international sales and higher costs are affecting manufacturers long-term investments, resulting in lower growth projections and limited spending for expansion and workforce additions," explains Misthal. "Until concerns over demand and profitability subside, executives will continue to maintain a conservative stance on spending and keep a closer eye on their margins."

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