NewsDesk: Large Manufacturers' Outlook: Optimistic, but Cautious
While optimistic about their own prospects for revenue growth in the next 12 months, the majority of US industrial manufacturers are leery about the US and global economies, according to the Q3 2012 Manufacturing Barometer, a survey conducted by PricewaterhouseCoopers LLP (PwC; New York).
"Overall sentiment among those surveyed remains cautious toward the direction of both the US and global economies," said Bobby Bono, US industrial manufacturing leader for PwC. "Margins remained flat during the third quarter and inventories rose, while concerns rose regarding a lack of demand as a barrier to growth. There was also a notable pullback in capital and operational spending plans for overseas expansion. These factors may point to the continued uncertain global climate and a more guarded approach being taken by industrial manufacturers."
During the October 2012–October 2013 period, 82% of respondents believe revenue will grow at their companies. A mere 9% foresee a falloff in revenue. In addition, many respondents plan to add employees, invest in new products and spend more on research and development.
Net new hiring over the next 12 months is planned by 47% of respondents, up five points from the previous quarter. Staff reduction of full-time equivalent employees is planned by just 7% of those surveyed.
Despite this apparent optimism, the projected average growth rate for own-company revenue over the next 12 months dropped from 5.6% in the second quarter to 4.6%. This was below the 5% estimate seen in the Q3 2011 Manufacturing Barometer survey.
In addition, optimism regarding the 12-month outlook for the US economy dropped to 37% in the third quarter of 2012, according to the survey, down 15 points from 52% in the second quarter, but remained well above the record low levels during the same quarter of 2011. Meanwhile, PwC found sentiment regarding the 12-month outlook for the world economy among manufacturers who market abroad remained low at 29%. While low, this is a 16-point improvement over the second quarter. The majority of respondents (54%) expressed uncertainty regarding the 12-month outlook for both the US and global economies.
"In addition to the uncertainty US industrial manufacturers are facing, they also identified the top three barriers to growth during the next 12 months. Lack of demand rose sharply to 67% in the third quarter of 2012, from 48% in the previous quarter, followed by legislative/regulatory pressure at 44% and oil/energy prices at 33%," said Bono.
PwC’s Manufacturing Barometer is a quarterly survey of US-based executives in large, multinational industrial manufacturing businesses.
BCG: No US Workforce Shortage
In a report that contradicted findings by other organizations, the Boston Consulting Group on Oct. 15 announced that it had found "no evidence of a high-skilled labor gap nationwide."
BCG estimated that the US manufacturing sector is short "only 80,000 to 100,000 workers," which represents less than 1% of the 12 million workers that the government classifies as working in manufacturing.
The report contradicts a 2011 study by Deloitte and The Manufacturing Institute, which concluded that as many as 600,000 manufacturing jobs, or about 5% of those in the sector, are going unfilled. While that report was based on a nationally representative survey of manufacturers, BCG used a different methodology.
BCG said it "looked at localities where wage growth has exceeded inflation by at least three percentage points annually for five years. Wage growth is a widely accepted indicator of skills shortages in other sectors, such as energy; it reveals where employers have been forced to bid up pay to attract hard-to-find workers."
By that measure, BCG further concluded:
- "Only seven states ... show significant or severe skills gaps." Those were identified as Alaska, New Mexico and Wyoming, Alabama, Nevada, Montana and Hawaii.
- "Trying to hire high-skilled workers at rock-bottom rates is not a skills gap."
- Workforce "shortages are local, not national, in nature and reflect imbalances driven by both location and job classes."
Harold Sirkin, a BCG senior partner and co-author of the research, told ME that manufacturers would be raising wages and hiring people to train themselves if the workforce shortage was severe, which is why he said wage inflation is a "more appropriate measure" of a skilled shortage.
"If they can’t afford to hire and train, that’s a different issue" than a workforce shortage, Sirkin said. "What it is is companies trolling for people at low wages."
Danaher Corp. (Washington, DC) and Cooper Industries (Houston) announced the sale of the companies’ joint venture, Apex Tool Group (Sparks, MD), to Bain Capital (Boston) for approximately $1.6 billion, subject to post-closing adjustments. Currently, Danaher and Cooper each maintain a 50% joint venture ownership interest in Apex. This transaction is slated to close in the first half of 2013.
Alfa Laval Inc. (Richmond, VA) has acquired Gamajet Cleaning Systems (Exton, PA), a supplier of high-impact cleaning machines targeting the industrial and sanitary processing industries. No financial terms of the transaction were disclosed.
DGI Supply (Wheeling, IL), a DoALL Company, announced it will acquire Anich Industries Inc. (Ocala, FL). Terms were not disclosed.
Grinding developer ANCA (Melbourne, Australia) has won the Large Advanced Manufacturer category in Australia’s Governor of Victoria Export Awards for the seventh time. The company, a supplier of CNC tool and cutter grinders, experienced exceptional growth in 2011, said Pat Boland, Anca co-founder and director, in announcing the award. ANCA makes a significant investment to the Australian economy with 98% of its products exported globally with its major markets in Germany, Japan, China and the United States. ME
This article was first published in the December 2012 edition of Manufacturing Engineering magazine. Click here for PDF.