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Major Capital Spending Plans on the Rise Among US Industrial Manufacturers


Companies putting cash to work as competitive pressure grows; M&A plans increase as companies look to cement leadership, add talent and strengthen technologies



NEW YORK, July 17, 2014― Optimism regarding the direction of the domestic economy remained positive among U.S. industrial manufacturers during the second quarter of 2014, according to the Q2 2014 Manufacturing Barometer, released today by PwC US.  In addition to the positive sentiment, PwC’s report showed a rise in capital spending plans among industrial manufacturers as they focus on utilizing their cash positions to strengthen their products, add personnel and secure technology in a highly competitive market.

Optimism regarding the prospects of the U.S. economy during the next 12 months dropped among U.S. industrial manufacturers to 65 percent during the second quarter of 2014, compared to 71 percent in the first quarter.  However, sentiment rose slightly from 63 percent in the second quarter of 2013 and none of the respondents were pessimistic regarding the domestic outlook.  Of the U.S. industrial manufacturers polled, optimism about the world economy was at 38 percent during the second quarter of 2014, down slightly from 42 percent in the first quarter, but up from 31 percent a year ago.  Still, uncertainty regarding the global economic outlook remains high, with 57 percent of respondents indicating uncertainty compared to 50 percent in the first quarter. 

“We saw a notable increase in indications for both long-term capital investment and short-term spending plans during the second quarter,” said Bobby Bono, PwC’s U.S. industrial manufacturing leader.   “Companies have maintained historically high levels of liquidity and are increasingly looking to put this money to work in strengthening their operations, adding talent and improving technology in a highly competitive marketplace.  Plans for R&D spending reached the highest level in the past five quarters, as management teams look to differentiate their products and enhance the value proposition they offer to their customers.  This comes against a backdrop of sustained optimism regarding the domestic economy, coupled with a continued high level of uncertainty regarding the direction of global commerce.”


Regarding actual company growth expectations, 77 percent of survey respondents expect positive revenue growth for their own companies in the next 12 months, with nine percent forecasting double-digit gains and none anticipating decreased revenues.  The projected average revenue growth rate for own-company revenue over the next 12 months was 5.2 percent, consistent with last quarter’s 5.3 percent, and above the 4.6 percent recorded in the second quarter of 2013.

Plans for new investments of capital rose notably during the second quarter of 2014, with 52 percent of respondents indicating increased outlays in the next 12 months, up from 39 percent in the previous quarter and 40 percent in the second quarter of 2013.  The mean investment as a percentage of total sales was also slightly higher than the prior quarter’s 5.4 percent, at 5.7 percent.  Operational spending plans remained high with 75 percent of respondents indicating increased short-term spending in the next 12 months, identical to the second quarter.  Plans for spending on research and development rose significantly to 45 percent, from 34 percent in the first quarter and 38 percent in the second quarter of 2013.  Other areas of investment focus included new product or service introductions (43 percent) and information technology (33 percent).

The Q2 Manufacturing Barometer also indicated a notable rise in plans for M&A spending.  Thirty eight percent of respondents planned M&A activity in the year ahead, compared to 28 percent in the first quarter and 23 percent in the second quarter of 2013.  The majority of that group is focused on purchasing another business, followed by the sale of part/all of their own business or a spin-off.  

“The intense competitive environment combined with strong balance sheets at many companies is leading to an increased interest in M&A among industrial manufacturers. Companies are doubling down on what they do best, and are primarily looking to tap their cash to further strengthen their core product offerings, rather than entering new markets or expanding abroad,” Bono continued.

Regarding hiring, 48 percent of U.S. industrial manufacturers surveyed plan to add employees to their workforce over the next 12 months.  This is down from 56 percent in the previous quarter, but remains above the 42 percent reported in last year’s second quarter.  Consistent with the previous quarter, the most sought-after employees will be skilled labor (32 percent), followed by production workers (27 percent) and professionals/technicians (20 percent). Conversely, plans to hire sales and marketing professionals dropped to eight percent in the second quarter from 15 percent in the first quarter.  Plans to hire white collar support also decreased to eight percent in the second quarter from 20 percent in the first quarter.

Among the survey findings, the major headwind to growth over the next 12 months is now seen as legislative/regulatory pressures, rising nine points to 47 percent from a low in the first quarter of 38 percent, but still well below the 53 percent recorded in last year’s second quarter.  Lack of demand was cited as the second leading potential barrier to growth in the next 12 months for 42 percent of respondents.  This was followed by competition from foreign markets and oil/energy prices, which were both cited by 28 percent of respondents.  Conversely, concerns regarding capital constraints dropped to 17 percent of respondents, compared to 28 percent in the first quarter.


To read the report in its entirety, click here.


About the Manufacturing Barometer

PwC's Manufacturing Barometer is a quarterly survey based on interviews with 60 senior executives of large, multinational U.S. industrial manufacturing companies about their current business performance, the state of the economy and their expectations for growth over the next 12 months. This survey summarizes the results for Q2 2014 and was conducted from April 3, 2014 to June 27, 2014.  To view the complete Manufacturing Barometer report, visit For information about other Barometer surveys, including recent economic trend data and topical issues, visit

About PwC’s Industrial Products practice

PwC’s Industrial Products (IP) practice provides financial, operational, and strategic services to global organizations across the aerospace & defense (A&D), business services, chemicals, engineering & construction (E&C), forest, paper, & packaging (FPP), industrial manufacturing, metals, and transportation & logistics (T&L) industries. With more than 31,000 professionals located in over 150 countries, PwC’s IP global professionals deliver a wide range of industry-focused tax, assurance, and advisory services to address critical business issues. For more information please visit:

About PwC USPwC

PwC US helps organizations and individuals create the value they're looking for. We're a member of the PwC network of firms in 157 countries with more than 184,000 people. We're committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at Gain customized access to our insights by downloading our thought leadership app: PwC's 365™ Advancing business thinking every day
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© 2014 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC US refers to the US member firm, and PwC may refer to either the PwC network of firms or the US member firm. Each member firm is a separate legal entity. Please see for further details.

Published Date : 7/17/2014

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