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US Manufacturers Foresee Growth in Revenues
NEW YORK -- Optimism regarding projected growth of revenues increased among U.S. industrial manufacturers during the third quarter, PriceWaterhouse Coopers says. The manufacturers are forecasting an average growth rate of 5.6% over the next 12 months, up from 5.2% in the second quarter and 4.2% a year ago.
The positive outlook ran counter to a notable softening in sentiment regarding the future direction of the U.S. and global economies, coupled with increased concerns about the potential effects of legislative/regulatory and tax policies, according to the Q3 2014 Manufacturing Barometer by PwC US.
Optimism regarding the prospects for the U.S. economy during the next 12 months dropped among U.S. industrial manufacturers to 57% during the third quarter, compared to 65% in the second quarter and 60% in the third quarter of 2013. While the indicator remained solidly in positive territory, it represented the lowest level in the past six quarters. At the same time, optimism about the world economy dropped to 30%, down from 38% in the second quarter -- a reading that was the lowest in eight quarters.
"The projected revenue growth rate among industrial manufacturing companies rose during the third quarter, indicating increased levels of confidence in company fundamentals and competitive positioning," said Bobby Bono, PwC U.S. industrial manufacturing leader, in a prepared statement. "The improved outlook for company performance ran counter to a decline in sentiment regarding the direction of the economic environment, particularly on the international stage. At the same time, we saw a notable uptick in caution regarding the potential impacts of legislative/regulatory and taxation policies. This tells us management teams believe they are making the right decisions to grow, but remain leery of external factors beyond their control, resulting in some abatement in the level of near-term spending and investment plans."
Among the major findings of the survey, 59% of respondents singled out legislative/regulatory pressures as the major impediment to growth over the next 12 months, up from 47% last quarter and 58% in the third quarter of 2013. This was followed by lack of demand, cited by 43% of respondents, in line with 42% during the second quarter and down slightly from 45% last year. In addition, concerns regarding taxation policy jumped to 31% compared to 25% in the second quarter and 22% last year.
Falling optimism regarding the economic outlook coincided with a moderation in plans for new investments of capital, with 36% of respondents saying they’ll spend more in the next 12 months, down from 52% the previous quarter and 48% in the third quarter last year.
Despite plans to spend less, sentiment regarding hiring remained steady, with 52% of U.S. industrial manufacturers saying they intend to add employees to their workforce over the next 12 months. Consistent with the previous quarter, the most sought-after employees will be skilled labor (33%), followed by production workers (26%) and professionals/technicians (26%). Plans to hire white collar support ticked up modestly to 10% from 8% in the second quarter, but remained well below the 17% level recorded in the third quarter of 2013.
The latest Barometer found that the top potential trigger to increase investment in respondents' own companies over the next few years is lower costs of raw materials, cited by 51% of respondents. The second-most important trigger to growth was new products or service innovations, cited by 43%.
Published by The Business Journal, Youngstown, Ohio.
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