Reluctant Investment in New Hires Tempers Optimism

Published: Sunday, May 2, 2004 - 22:00

Manufacturing industry executives are optimistic despite plans to reduce their overall workforce by 1.9 percent over the next 12 months, according to the PricewaterhouseCoopers Manufacturing Barometer.

The first quarter barometer consisted of 80 interviews with a panel of senior executives from large, U.S.-based industrial manufacturing companies. Although workforce reduction was the theme across the board, the survey shows that 36 percent of manufacturers plan to add to their workforce whereas 23 percent plan to reduce it. Despite these mixed signals, the barometer suggests that executives are increasingly optimistic about the economy and expect top-line growth for the year.

"Job growth is a concern as manufacturers desire to remain lean--doing more with less," says Dean Simone, the U.S. leader of PricewaterhouseCoopers’ industrial products practice. "These results show that manufacturers who plan to add to their workforce will do so cautiously, whereas those who plan to reduce it will do so more aggressively. However, there are several positive indicators that point to improved prospects for U.S. manufacturers. The pricing environment appears to be firming, and manufacturers expect to benefit from the growing economy."

A solid majority of industrial manufacturers are experiencing top-line growth. Sixty-five percent reported positive revenue growth over the last 12 months and 18 percent reported negative growth. Looking ahead, 83 percent expect positive revenue growth over the next 12 months.

Manufacturing executives, however, have scaled back their expectations based on a pause in performance during the first quarter. Even with the slight pullback, manufacturers are still optimistic about their current and future growth prospects. Ninety percent believe that the economy grew in the first quarter; none describe it as declining. Looking ahead, 79 percent are optimistic about the economy’s prospects over the next 12 months while only three percent are pessimistic.

Perhaps one indication of this optimism is that more manufacturers are willing to raise prices in what has been a difficult pricing environment. Twenty-three percent of manufacturers reported prices were up in the first quarter, an increase from the 13 percent who reported similarly in the previous quarter. Although 28 percent reported that prices were down, this gap has closed significantly over the past three quarters.

PricewaterhouseCoopers’ Manufacturing Barometer is a quarterly survey of executives in large, U.S.-based industrial manufacturing companies that measures opinions on subjects ranging from the domestic economy, barriers to growth, margins and pricing, new investment strategies, hiring plans, and business initiatives under consideration. It’s developed and compiled with assistance from the opinion and economic research firm of BSI Global Research Inc.

The full report is available by clicking here.

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