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Manufacturers turn cautious on global economic outlook

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Manufacturers turn cautious on global economic outlook

Tempered outlook reflects concerns over impact of China slowdown and strong dollar.

Sentiment regarding the direction of the global economy took a sharp turn downward among US industrial manufacturers, according to a survey released by professional services firm PwC US today. 

Global concerns also served to moderate optimism regarding the domestic outlook, while slowing plans to hire more workers.  At the same time, capital and operational spending forecasts among US companies remained healthy.

During the third quarter of 2015, optimism regarding the direction of the global economy dropped to 23% from 38% in the previous quarter and 30% in the third quarter of 2014.  In addition, pessimism rose to an equal level with optimism (23%), reflecting an uncertain outlook for international commerce.  Further, 40% of respondents indicated they believed the world economy was declining, showing greater concern than in the previous quarter (25% in Q2).

Optimism regarding the US economic outlook remained positive but dropped to 60% in the third quarter of 2015 from 69% in the second quarter.

Conversely, optimism regarding the US economic outlook remained positive but dropped to 60% in the third quarter of 2015 from 69% in the second quarter.  Despite the renewed sense of caution regarding the global stage, company revenue forecasts for the next 12 months rose to a moderately high 5.3% in the third quarter, compared to a forecast of 4.9% in the second quarter. 

"US industrial manufacturers became increasingly cautious on the outlook for the global environment as they assessed the impact of the slowdown in China and the strengthening dollar," said Bobby Bono, PwC's US industrial manufacturing leader.  "Despite the downward turn in overseas sentiment, overall domestic growth prospects remained healthy and manufacturers continue to focus on further strengthening core products and services.  They are keeping their cash at home and directing investment toward enhancing their value propositions in an effort to remain competitive and drive future revenues."

As a result of the decline in global sentiment, US industrial manufacturers scaled back hiring plans in the third quarter, with only 37% planning to add employees to their workforce over the next 12 months, down 15 points from the 52% level indicated in both the second-quarter and year ago comparable period.  The total net workforce growth projection in the third quarter was minus 0.2%, indicating further cutbacks in hiring among industrial manufacturing firms.

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