Global And U.S. Economic Optimism Falls Sharply Among Large Industrial Manufacturers, PricewaterhouseCoopers Finds
Top Threat to Manufacturing Growth is Oil and Energy Prices
PricewaterhouseCoopers’ Manufacturing Barometer interviewed 70 senior executives through July 15, 2005, in large multinational industrial manufacturing companies about the business climate. This article summarizes key findings.
NEW YORK, August 2, 2005 — U.S.-based industrial manufacturers are considerably less optimistic about the global and domestic economies, according to PricewaterhouseCoopers' most recent Manufacturing Barometer survey. Just 46 percent of respondents, compared to 70 percent last quarter, are optimistic about the world economy and only 54 percent, compared to 71 percent last quarter, are optimistic about the U.S. economy. The leading source of this uncertainty is concern over oil and energy prices.
“Higher oil prices continue to impact manufacturers’ 12 month forecast,” says Jorge Milo, U.S. leader of PricewaterhouseCoopers’ industrial manufacturing practice. “The reduced economic optimism of senior executives is reflected in lower revenue growth estimates and hiring rates.”
The survey shows that higher oil and energy prices have resulted in the following negative effects:
Eighty-eight percent of manufacturers said oil and energy prices have a strong or moderate negative impact on the U.S. economy.Eighty percent view oil and energy prices as having a strong to moderate negative impact on consumer confidence. Seventy-four percent cited oil and energy prices as having a strong to moderate negative impact on profit margins for manufacturers.
Overall, revenue expectations have leveled the past two quarters at 6.5 percent for the next 12 months, down substantially from the 2004 Q3 rate of nine percent. Forty-two percent of manufacturers expect to make major new capital investments over the next 12 months – in comparison to 60 percent last quarter. Finally, only 43 percent of manufacturers are planning to increase their workforce over the next year – down nine percent from last quarter.
“In the past, optimism, growth and investment have rebounded after a decline. This upcoming period could be an important measure as manufacturers continue to battle high oil and energy prices in the foreseeable future,” said Milo.
PricewaterhouseCoopers’ “Manufacturing Barometer” is developed and compiled with assistance from the opinion and economic research firm of BSI Global Research, Inc.
PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services for public and private clients. More than 120,000 people in 139 countries connect their thinking, experience and solutions to build public trust and enhance value for clients and their stakeholders
PricewaterhouseCoopers' Industrial Products practice is a global network of over 1,000 partners and 17,000 client service professionals who provide industry-focused assurance, tax and advisory services to over 1,000 public and private companies in the aerospace & defense, chemicals, forest & paper, industrial machinery, and metals sectors.
Unless otherwise indicated, “PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP, a Delaware limited liability partnership. PricewaterhouseCoopers LLP is a member firm of PricewaterhouseCoopers International Limited.
For more information about Barometer surveys, including recent economic trend data and topical issues, please visit our web site: www.barometersurveys.com
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| | | Full Report of Manufacturing Barometer Survey | | |
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| | | Executive Summary of Manufacturing Barometer Survey | | |
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