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Survey Says: C-level Confidence Among Mid-Sized Manufacturers Looks Strong

Mid-sized U.S. manufacturing CFOs are feeling confident that the economy will remain strong in 2015, according to the findings from the seventh edition of the Prime Advantage Group CFO Survey. The survey of CFOs whose companies are members of the Chicago-based buying group also reveals other related financial projections and top economic concerns among industrial manufacturers. 

Some of the survey's findings that underscore this sustained confidence include:

  • CFOs have a strong focus on large capital investments, as 96% of their companies plan on purchasing new equipment for their plants in 2015.
  • The reinvestment trend is also related to new products, with 67% of their companies planning to launch new products and services in 2015, and 44% boosting R&D efforts in 2015.
  • Confidence in the economy is extremely high, with 93% of these manufacturing CFOs expecting their industries to either remain constant or grow over 2015. Ninety percent expect revenues to remain at 2014's solid rates, or to improve.
  • Concern about U.S. budget deficit has declined, while confidence in the U.S. government has increased — a change of about 40% from the 2014 survey.

Ninety-three percent of respondents to the Prime Advantage Group CFO Survey predicted that their markets will either remain the same as 2014 or grow in 2015. Also, 70% are predicting revenue growth in 2015. This was a slight change from the 2014's survey findings, but still reflects a healthy level of optimism from these mid-tier industrial manufacturers.

Ninety-three percent of respondents to the Prime Advantage Group CFO Survey predicted that their markets will either remain the same as 2014 or grow in 2015. Also, 70% are predicting revenue growth in 2015. This was a slight change from the 2014's survey findings, but still reflects a healthy level of optimism from these mid-tier industrial manufacturers.

Given that our 2014 CFO Survey showed some of the highest confidence rankings ever recorded among our group (which represents more than 750 small and mid-sized industrial manufacturers across over 25 markets), we are pleased that the latest edition of this survey offers sustained optimism for mid-market manufacturers in 2015. And when we look at the findings for other similar surveys, it is easy to find support for this positivity.

For instance, Chief Executive Magazine polled mid-market CEOs in March and found these CEOs also displaying confidence about their prospects in the year ahead. Chief Executive 's survey findings certainly reflect that some circumstances have improved over the past year including: oil prices have dropped, the U.S. dollar has strengthened and hiring conditions have improved for many since last year.

Wages and health care costs are expected to increase slightly in 2015 for mid-sized industrial manufacturers, while capital spending/R&D and marketing budgets will rise significantly.

Wages and health care costs are expected to increase slightly in 2015 for mid-sized industrial manufacturers, while capital spending/R&D and marketing budgets will rise significantly.

However, when the findings of this year's survey are compared to past editions, we see that some projections and numbers have slightly declined since 2014. This may reflect the emergence of some caution among these manufacturing CFOs. Another reliable barometer, the Manufacturing ISM Report on Business, also showed a decline in the PMI for March to 51.5%, though still sitting comfortably above the 50 point marker that indicates whether a market is growing or contracting. One of the key findings from the ISM's latest Report on Business for some of our members, as well as readers of EBNOnline, is that raw materials prices have declined for the fifth consecutive month.

As procurement professionals, readers of this website are drawn to emerging trends such as declining raw materials prices. The CFOs of Prime Advantage's more than 750 member companies also try to keep on the pulse of these trends. For instance, 75% of our CFOs stated pricing pressure from competition is the external factor that is their greatest concern in 2015. Customer demand is the second biggest apprehension, clocking in as a top concern for 67% of CFOs. This is the fourth consecutive year of our survey that “pricing pressure from competition” and “customer demand” ranked as the top two concerns. “Distress over foreign competition” cracks the top three for the first time in this survey's history, most likely as a result of the strengthening U.S. dollar.

These concerns imply that the ability to control costs will be crucial to these CFOs' stated objectives of increasing investment in new product development, capital investments, as well as sales and marketing efforts.

The November-December 2014 study “Achieving Value Beyond Cost”, from HfS Research and KPMG, shows that one of the top C-Suite priorities in 2015 is the ability to drive down operating costs, which was cited as either “increasingly important”(33%) or “mission critical” (62%) by the 168 enterprise buyer executives polled.

While some of the findings from Prime Advantage's 2015 Group CFO Survey truly do hearken to a healthy level of enthusiasm in the economy this year, we're not entirely surprised that mid-sized manufacturing CFOs are also closely monitoring external factors in order to make sure that these optimistic plans do not get waylaid as the year unfolds.

Let us know how you think things are going in the comments section  below.

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