Executives at large U.S.-based manufacturing firms lowered their outlook for revenue growth for the next year from 5.2% to 4.3%, the PwC Manufacturing Barometer reported today. Still, 78% of the respondents in the quarterly survey forecast revenue growth at their own companies for the next 12 months.
Optimism about the U.S. economy rose from 48% in PwC’s last survey to 55%, and both those who were uncertain (40%) and pessimistic (5%) about the economy dropped from the previous quarter.
But optimism about the global economy remained much lower, at 36% (compared to 40% in the fourth quarter of 2012). Manufacturers selling abroad showed broad uncertainty (45%) while pessimism about the world economy increased 4 points to 19%.
That lack of confidence about world markets was also reflected in forecasts for international sales. The executives polled said they expect international sales to contribute 32% of total revenues, down from 38% forecast in the previous two quarters.
Plans for M&A activity showed a steep dropoff, down 16 points to 19%. Investments in international markets also declined, to 9% (a drop of 14 points from 4Q 2012).
Operations Spending to Increase
Nearly three in four manufacturing executives told PwC they expect their firm’s operational spending to increase over the next 12 months. Respondents who expect to hike research and development spending increased by 14 points to 52%, compared to 37% in the first quarter of 2012. Higher spending was also forecast for new product or service introductions (38%) and information technology (28%), though both were lower than estimates throughout 2012.
Plans for major new capital spending dipped in the first quarter of 2013 to 43% from 47% last quarter. Mean investment as a percentage of total sales dropped to 4.8%, compared to 6.0% a year ago.
Off 13 points from the end of 2012, 45% of manufacturers told PwC they expect to hire employees over the next 12 months. The most sought-after employees will be professionals/technicians (29%), followed by production workers (23%) and skilled labor (19%).
A small majority (55%) of manufacturers said legislative/regulatory pressures would represent a barrier to business growth in the next 12 months. Other leading concerns cited were lack of demand (48%) and taxation policies (45%, up 12 points). Showing sharp declines as concerns from the first quarter of 2012 were oil/energy prices (53% in 1Q 2012 to 35%), competition from foreign markets (33% to 19%) and monetary exchange rate (32% to 12%).
Asked specifically about the impact of fiscal policy uncertainties, 76% of the executives said they would have a negative impact on their overall business or economic environment and 62% forecast they would have a negative impact on demand for their products or services. However, 59% said there would be no impact on their hiring plans over the next year.
