Industrial-size gain in economic confidence


ChartWe’ve noted in the past that consumer confidence is often out of sync with that of business executives, and that seems to be the case once again. If you’re worried about flat consumer sentiment, maybe the contrasting views of industrial execs might brighten your mood.

The study, from PWC, finds industrialist confidence in the prospects for the US economy soaring, and although sentiment isn’t as strong for the global economy, views on its chances for health are also markedly improved.

This first numerical leap is nothing short of astonishing: When PWC did this survey in  Q4 2011, 30% of industrial manufacturers expected the US economy to grow over the next 12 months. The Q1 2012 growth expectation is 70%.

PWC notes that the measure has been subject to considerable fluctuation, pointing out that the confidence index stood at a pathetic 5% in Q3 2011.

Only 44% are looking to the global economy with the same confidence, but that number is also up significantly from its Q4 2011 16% reading.

Fueling the surge is first-person confidence. 92% of the companies surveyed expect positive revenue growth over the next 12 months, and the average gain expected is 5.6%.

PWC notes that many companies are benefitting from the many strategies put in place to deal with the Great Recession, and are reaping the rewards of both an improving economy and a more efficient organization.

PWC’s Barry Misthal commented, “Optimism regarding the U.S. economy among U.S. industrial manufacturers improved markedly during the first quarter of 2012, while views of the worldwide economy remain guarded, improving only modestly due to continued high levels of uncertainty.  The positive gains in sentiment, primarily in the U.S., have been buttressed by higher forecasts for own-company revenue in 2012, as well as perceived decreases in barriers to growth.”

“Moreover,” continued Misthal, “margins remained positive, aiding confidence levels and supporting plans for hiring and investment. Following a prolonged period of streamlining and cost-cutting during the economic downturn, there is no question that companies have achieved efficiency gains, while balance sheets improved measurably.”

Misthal concluded, “Hence, management teams are increasingly focusing on strengthening their product offerings and competitive positioning, as well as evaluating global expansion strategies through both M&A and new facilities building.”

According to PWC, 68% of those surveyed believe that the US economy is on a growth path, and none believe it is heading into decline. Globally, 36% believe the economy is growing, leavened by 16% who believe it is in decline. The missing percentages in both categories represent those who believe the economy is flat.

RBR-TVBR observation: The surveys at the moment are running flat to good for the most part. Industrial confidence is especially encouraging, since they have the power to inspire confidence in many other economic sectors.