Manufacturing Execs Open Pockets, See Growth Ahead

By: Steve Minter, Industry Week

Remaining positive about the U.S. economy and sales at their own companies, manufacturing executives in two new surveys say they will be increasing capital spending to prepare for improving business conditions.

Some 52% of industrial manufacturers in the quarterly Manufacturing Barometer survey conducted by PwC said they plan major new investments in CAPEX spending, up 13 points from the March 2014 survey. The mean investment was expected to be 5.7% of sales, higher than the 5.4% reported three months ago and well above the 4.0% forecast a year ago.

Manufacturers are also increasing shorter-term spending, the survey found, with 75% planning increased operational spending, led by R&D, introductions of new products or services and information technology. More than a third (38%) also plan to be engaged in M&A activity, with 35% planning to buy another business.

"Companies have maintained historically high levels of liquidity and are increasingly looking to put this money to work in strengthening their operations, adding talent and improving technology in a highly competitive marketplace," said Bobby Bono, PwC’s U.S. industrial manufacturing leader. "Plans for R&D spending reached the highest level in the past five quarters, as management teams look to differentiate their products and enhance the value proposition they offer to their customers."

Plans for both domestic and international investment also increased in the MAPI Business Outlook survey conducted by the MAPI Foundation, the research arm of the Manufacturers Alliance for Productivity and Innovation. The U.S. Investment Index, which examines plan for domestic capital investment in 2014, increased from 59 this past March to 67 in the current survey. The Non-U.S. Investment Index, which forecasts investment outside the U.S., rose to 64 in the June survey from 59 in March.

There’s No Place Like Home!

Manufacturers remained positive (65%) about the U.S. economy’s prospects for the next 12 months, the PwC survey found, though that figure dipped 6 points from the last quarter. But industrial leaders were much less positive about the world economy. Some 38% said they were optimistic about the global economy, a drop of 3 points from the previous quarter. The largest group, 57% of the manufacturers who market abroad, said they were uncertain about prospects for the global economy.

Industrial manufacturers expect those positive conditions in the economy to translate to improved sales. Some 77% of the executives polled by PwC say their revenue will increase in the coming year, with the average increase pegged at 5.2%, just off last quarter’s projection of 5.3%. None of the executives expected to see sales dip in the next 12 months.

See this and other newsletter articles at http://amt-mep.org/files/4214/0734/2344/2014-08.pdf

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