Global economy stays strong

Staff -- Industrial Distribution, 6/1/2007

Eighty-three percent of industrial manufacturers are optimistic about the prospects for the global economy over the next 12 months, according to PricewaterhouseCoopers' Manufacturing Barometer, a quarterly survey of U.S. industrial manufacturing executives.

The first-quarter 2007 survey showed that 69 percent of U.S. executives believe the domestic economy is growing. While an optimistic sign, this was down from 92 percent reported in the first quarter of 2006.

The ongoing softening of the U.S. economy has caused a decline in optimism among executives; 57 percent expressed optimism in the recent survey, down from 64 percent in the previous quarter.

However, just five percent of manufacturers said they're pessimistic about the U.S. economy.

“Despite their concerns over the domestic economy, the outlook is not so bleak for the industrial manufacturing industry,” said Barry Misthal, PricewaterhouseCoopers' industrial manufacturing sector leader.

This was reflected in the number of survey respondents who said they intend to boost hiring in 2007, with 46 percent planning to add employees to their workforce over the next year.

This was a 13-point increase from the previous quarter's survey, when 33 percent of manufacturers said they planned to add workers.

However, these hiring increases depend on, among other things, manufacturers finding qualified, talented workers.

Forty-one percent of the manufacturers who responded to PWC's survey expressed concern over a lack of qualified workers.

The survey also showed higher levels of optimism about the world economy.

Fifty-nine percent of executives told PWC they plan to increase international sales and that they expect nearly 34 percent of their revenues to come from overseas.

In addition, 39 percent said they're considering expanding into new markets abroad.

Manufacturers downplayed revenue projections for their own companies, however, as those estimates fell from 6.5 percent in the prior quarter to 5.5 percent in the first quarter of this year.

“Executives are seeing a slowdown in their rate of growth and revenue projections for 2007 compared to 2006,” said Misthal. “However, this will turn slightly upward over the next 12 months through Q1 2008, although with a continued concern about oil and energy costs.”

As in previous surveys, manufacturers said energy prices remain a leading barrier to projected growth, though that concern is easing. Fifty-one percent expressed concern about the issue, down from 62 percent in the fourth quarter of 2006.

In summing up the more recent survey, Misthal said, “This quarter's data seems to support that notion that the world economy is not anticipated to turn down, while the U.S. economy stays soft.”