The following findings from PricewaterhouseCoopers' Manufacturing
Barometer, a quarterly survey, are based on interviews with 61 senior
executives of large, multinational U.S. industrial manufacturers about
the business outlook. This release summarizes results for Q2 of 2007.
NEW YORK, July 26, 2007 (PRIME NEWSWIRE) -- PricewaterhouseCoopers' Manufacturing Barometer reports that U.S. industrial manufacturers lowered their average revenue growth projections for the next 12 months from 6.8 percent (as reported in Q1 of 2007) to 5.7 percent, a 16 percent reduction. Additionally, executives are only expecting a 3.0 percent revenue growth rate for the industrial manufacturing sector as a whole in the 2007 calendar year.
While optimism in the global economy remains high (78 percent), more than half (53 percent) of manufacturing executives cite competition from foreign markets as one of the leading barriers to achieving revenue targets.
"Most U.S. manufacturers believe that the world economy will grow faster than the domestic economy, and in order to grow their business they need to compete successfully outside the United States," said Barry Misthal, partner and Industrial Manufacturing Sector Leader, PricewaterhouseCoopers. "As more and more of their sales come from abroad, however, it's also apparent that they are keeping a keen eye on foreign competition, which continues to intensify."
The leading threat to revenue growth is the oil/energy impact on increased costs (59 percent). Competition from foreign markets follows closely at 53 percent, which is up significantly from last quarter where it came in at 39 percent. Monetary exchange rates and interest rates pose additional cause for concern among senior executives. Nearly one-third (30 percent) of the respondents cited exchange rates as a future barrier to growth, up from 21 percent last quarter, and 28 percent considered higher interest rates as another possible barrier to growth.
Yet, despite these threats, 62 percent of those surveyed are optimistic about the domestic economy, and 69 percent believe the U.S. economy grew during the second quarter. In fact, 90 percent of executives think the world economy expanded in the second quarter.
For those industrial manufacturing companies selling overseas, the majority (67 percent) increased international sales during the second quarter. Looking ahead over the next 12 months, international marketers expect 35 percent of their total revenue to come from abroad.
During the second quarter, a little under half (46 percent) of industrial manufacturers experienced increased costs and 38 percent decided to raise their prices. Overall, gross margins appeared to fare well, with 31 percent citing higher gross margins while only 16 percent reported lower gross margins.
Plans for major new investments of capital are also on the rise, with 57 percent of companies looking to invest in a variety of business initiatives, including new product/service introductions, information technology and research and development. Executives anticipate spending 9.4 percent of revenues on such investments.
"Overall, these results indicate that manufacturing executives are expecting slower, but still positive, growth over the next year," said Misthal. "International sales are up, margins are steady and new capital investments are in the works. At the same time, however, they are concerned about continued high energy costs, fluctuating monetary exchange rates and higher interest rates. How they navigate through these anticipated economic challenges will set the course for their future profitability."
For access to the complete Manufacturing Barometer report, please visit www.pwc.com/manufacturing. For more information about other Barometer surveys, including recent economic trend data and topical issues, please visit our web site: www.barometersurveys.com
PricewaterhouseCoopers' "Manufacturing Barometer" is developed and compiled with assistance from the opinion and economic research firm of BSI Global Research, Inc.
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