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Major capital spending plans on the rise among US industrial manufacturers

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Major capital spending plans on the rise among US industrial manufacturers

Companies putting cash to work as competitive pressure grows.

According a recently-released survey by professional services firm PwC, optimism regarding the direction of the domestic economy remained positive among U.S. industrial manufacturers during the second quarter of 2014.

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

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Regarding actual company growth expectations, 77% 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%, consistent with last quarter's 5.3%, and above the 4.6% recorded in the second quarter of 2013.

Plans for new investments of capital rose notably during the second quarter, with 52% of respondents indicating increased outlays in the next 12 months, up from 39% in the previous quarter and 40% in the second quarter of 2013.  Operational spending plans remained high with 75% 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%, from 34% in the first quarter and 38% in the second quarter of 2013.  Other areas of investment focus included new product or service introductions (43%) and information technology (33%).

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