2011 Revenue Growth Projections for U.S. Industrial Manufacturers Improve

PwC's Q1 2011 Manufacturing Barometer points to continued uncertainty about U.S. and global economies; higher oil and energy prices and costs of goods and services raise concerns


New York — April 29, 2011 — The vast majority of U.S. industrial manufacturers expect positive revenue growth for 2011 in spite of the ongoing uncertainty about the U.S. and world economies' prospects over the next 12 months, according to the latest edition of the PwC US Manufacturing Barometer.

However, concerns over high oil and energy costs top the list of potential barriers to growth this year, while higher overall costs are driving industrial manufacturers to proactively respond to pricing challenges, according to PwC's Q1 2011 report.

"Despite lingering uncertainty over macroeconomic conditions, PwC's latest survey found that U.S. industrial manufacturers are increasingly positive about the future prospects of growth within their own businesses, as well as for the general industry," said Barry Misthal, U.S. industrial manufacturing leader for PwC. "The improving outlook can be attributed to industrial manufacturers feeling confident in their planning for 2011 and the ongoing investments they are making to further enhance their revenue opportunities."

The results of the PwC survey echo the findings of the latest Prime Advantage Group Outlook Survey, released earlier this week, which found that rising confidence among executives at small and midsized North American manufacturers is prompting increased capital spending and hiring, although concerns over rising costs threaten to stymie new investments. (Read more on this survey here.)

Optimism about Growth

The PwC survey revealed that the projected average growth rate for own-company revenue over the next 12 months rose to 7 percent in the first quarter of 2011 from 6.6 percent in the fourth quarter of 2010. The Q1 2011 rate more than doubles the 3 percent projected average growth rate reported in the first quarter of 2010.

Eighty-nine percent expect positive revenue growth for their own companies in the year ahead, an increase of 14 points over first quarter 2010 and 5 points over the fourth quarter. Thirty-three percent are forecasting double-digit growth, a significant increase of 21 points over first quarter 2010, while 56 percent are forecasting single digit growth. Only 5 percent forecast negative growth and another 2 percent are forecasting zero growth.

Looking at the next 12 months, 57 percent of industrial manufacturers expressed optimism about the U.S. economy, down 6 points from the fourth quarter of 2010, but 4 points higher than the same period in 2010. Uncertainty about the U.S. economy was cited by 38 percent of panelists, an increase of 8 points, while only 5 percent remain pessimistic versus 7 percent last quarter.

Forty-four percent of panelists were optimistic about projections for the 12 month outlook for the world economy, a decline of 16 points from the fourth quarter 2010. The majority (51 percent) are uncertain, up 13 points, while only 5 percent are pessimistic about the global economic outlook.

In the first quarter of 2011, 65 percent of respondents believed the U.S. economy was growing, up 4 points from the final quarter of 2010. For the first time in five years, no panelist believed it was declining. Thirty-five percent believed the U.S. economy did not change from last quarter. Gross margins for the first three months also remained positive. They were higher for 37 percent of panelists and lower for 29 percent, for a net plus 8 percent, which is below the fourth quarter's plus 15 percent.

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