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Manufacturers Optimistic About US Economy

Manufacturers are upbeat about the United States' economic prospects for the next 12 months, despite ongoing concerns about global economic growth, legislative pressure, and lack of demand.

The attitude has notably improved compared to last year, and optimism for economic outlook among US industrial manufacturers is at its highest level in five quarters, according to the recently released PwC Manufacturing Barometer quarterly survey.

This renewed confidence is impacting industrial manufacturers directly in terms of current and expected revenue growth and could trickle down further into the electronics supply chain.

PwC reported that while industrial company revenue forecasts are projected to stabilize in the next 12 months, about 82 percent of the 60 US-based industrial manufacturers surveyed expect to have positive revenue growth in the coming quarters; only 3 percent forecast negative growth for their own companies, and 8 percent expect zero growth (the remaining 7 percent did not report their revenue projections).

The US-centric hopefulness, however, was tempered by guarded caution related to other key areas. The two main barriers to growth are linked to legislative and regulatory pressures and lack of global demand, and survey respondents also appear worried about competition from foreign markets and the lack of qualified workers, which was indicative of the potential softness in new hiring during the second quarter, PwC found.

Said Bobby Bono, US industrial manufacturing leader for PwC, in a press release:

There remains a persistent dichotomy in viewpoints regarding the outlooks for the U.S. and world economies. Optimism regarding the domestic economy has increased, while worldwide economic sentiment remains restrained, with global uncertainty reaching the highest level in the past 12 months. The U.S. is starting to show signs of healthy demand trends and improving pricing power, supporting positive overall sentiment in the year ahead. However, as a result of the mixed global outlook, combined with the moderate domestic recovery and the specter of increased legislative and regulatory pressures, management teams are continuing to carefully manage their costs, while maintaining a focus on growing profitably.

Some of the dichotomy is already playing out beyond industrial manufacturers and with international companies. Just look at the news coming out of Royal Philips NV this week, for instance.

Philips, Europe's largest electronics company, saw its second-quarter profit jump 30 percent, an increase fueled by growth within its consumer and healthcare units and a pick up in orders from North America and emerging economies, Bloomberg reported. This was the fifth straight quarter the company's profit improved, and a focus on higher-margin lighting and healthcare products, in addition to its legacy consumer-electronic businesses, seems to have helped boost the bottom line, the paper said.

While it's uncertain exactly how the industrial manufacturing sector's economic outlook will influence the rest of the supply chain, you can bet there will be shakeout related to corporate compliance with the Dodd-Frank Act, and specifically Section1502 involving conflict minerals, PwC noted.

Since the act requires, by May 2014, assessment, new procedures and disclosure requirements for companies whose products contain conflict minerals from the Democratic Republic of Congo and its adjoining countries, companies across all industries have started to beef up compliance efforts. More than half of the industrial companies PwC surveyed have taken either some steps to prepare for compliance or are actively engaged in or leading compliance efforts. How these efforts play out will surely impact sourcing and purchasing strategies and protocols and require new standards suppliers will have to follow, PwC suggested.

What does the industrial sector's optimism about the US economy mean for your company?

13 comments on “Manufacturers Optimistic About US Economy

  1. t.alex
    August 8, 2013

    Any good news about US economony is positive news as this directly or indirectly improve the situation in other companies around the world !

  2. apek
    August 8, 2013

    Manufacturing has to come back eventually without any doubt. But at what cost? Do we know how much has China benefiited from the offshoring of manufacturing jobs from US over last decade? The manufacturing that would come back to US…would it be able to compete with cheaper chinese manufactured goods which are now of better quality as well? Does US consumer have sufficient purchaing power today in order to sustain the domestic consumer demand? 

    May be the following article would be a good read http://www.truth-out.org/opinion/item/16944-loss-of-us-dominance-in-global-electronics-and-semiconductor-industry-causes-revival-solutions-and-associated-us-economic-growth

  3. Adeniji Kayode
    August 8, 2013

    @ t.alax,

    I agree with you on that but do you also think that the effect would circulate or get noticed as soon as possible around the world?

  4. _hm
    August 8, 2013

    It will be nice to know this feedback from Avnet and Arrow. Theese are two significant players and they must have very good feelings for this. Can they add their comments here?

     

  5. Hailey Lynne McKeefry
    August 8, 2013

    I find it interesting that there are signs from a number of different parts of the industry are all pointing in a positive (at least slightly so) direction. I find that quite hopeful. On the other hand, i think that things change pretty quickly in the industry too. We'll continue to report the trends as they develop.

  6. elctrnx_lyf
    August 9, 2013

    Its good to hear about the optimism in the industrial market. Is it specific to healthcare or is there any other major indusries showing positive growth.

  7. ahdand
    August 9, 2013

    @elctrnx: It's a good sign indeed to see an industry like health care coming forward and showing signs of improvement. Other industries are very much in the growing path. The only worry was the industries which did carry high rate of sensitive data.

  8. Hailey Lynne McKeefry
    August 9, 2013

    @elctrnx_lyf, the growth is going to be broader than just health care. From a December 2012 report from the Institute for Supply Management, The 17 manufacturing industries expecting revenue improvement over 2012 — listed in order — are: Primary Metals; Petroleum & Coal Products; Computer & Electronic Products; Wood Products; Furniture & Related Products; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Paper Products; Chemical Products; Plastics & Rubber Products; Apparel, Leather & Allied Products; Miscellaneous Manufacturing; Transportation Equipment; Machinery; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; and Fabricated Metal Products.

    “Manufacturing purchasing and supply executives expect to see continued growth in 2013. They are optimistic about their overall business prospects for the first half of 2013, and are even more optimistic about the second half of 2013,” said Bradley J. Holcomb, CPSM, CPSD, chair of the ISM Manufacturing Business Survey Committee.

     

    To see more, click here.

     

  9. Hailey Lynne McKeefry
    August 9, 2013

    @elctrynx_lyf, one more thought, contract manufacturing is also on a growth curve, which bodes well for the indsutry.

     

  10. SunitaT
    August 10, 2013

    The market is pulling itself up. US is a large economy as well as a large consumer with significant contributions to the world economy. The manufacturers clearly see the prospects of supplying large consumers.

  11. SunitaT
    August 10, 2013

    Every maufacturer knows about the shortcomings of a market infested by powerful companies that provide stiff competition. However this can be partly overcome with a little bit of trust and help from the government, the suppliers as well as hiring employees who can take risks and provide new ideas.

  12. ahdand
    August 10, 2013

    Yes indeed, most of the manufacturers have studied the market well and they are much educated about the short comings of the economy but out of that lot most of them have not studied well on how to overcome the issue. That is why the US economy is still struggling. 

  13. Mr. Roques
    August 15, 2013

    Are they confident this is real growth and that the recession is over? If they've had 5 periods of growth, it meas something but how confident are they that it's the real thing? – so that they start being more aggresive. 

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