Ninety-four percent of industrial manufacturing executives reported that the U.S. economy grew in the second quarter. Looking ahead, 84% of manufacturers were optimistic about the economy's prospects over the next 12 months, up from 79% in the prior quarter. However, barriers to growth, including foreign market competition, monetary exchange rates and lack of qualified workers, remain a concern.
The barometer also compares the views between the manufacturing industry and a cross section of other business sectors. In past barometers, the manufacturing industry trailed the general consensus in most areas. However, manufacturers turned markedly more upbeat in the second quarter, matching the consensus economic outlook for all large businesses.
Companies planning major new investments over the next 12 months increased from 46% to 52%. However, 53% of manufacturers expect to increase budgets for new product or service introductions and 36% for research and development. These are better than the consensus levels of 47% and 26%, respectively.
Optimism about the world economy also increased sharply, from 65% in the prior quarter to 73%, surpassing the all-industry consensus of 69%.
Net margins for manufacturers were close to the consensus level, as were costs. Prices were increased by 44% of industrial manufacturers, but lowered by 12%, for a net of plus 32% - better performance than the all-industry benchmark of plus 28%.
“Industrial manufacturers have clearly become more upbeat on revenue growth, new hiring and economic optimism,” said Jorge Milo, U.S. leader of PricewaterhouseCoopers LLP's industrial manufacturing practice. “In this environment of growth with underlying concerns about inflation, it is a very positive sign that manufacturers are in the forefront with their pricing power.”
The PWC report confirms steady increases in the manufacturing sector by the monthly Industrial Supply Management survey. Through July, the widely followed ISM index has tracked growth in the economy for 14 consecutive months.