Considering the recent mix of positive and negative data, it's been a bit difficult to get a good read on whether the manufacturing recovery has legs. PwC's latest survey of manufacturing executives supports the bullish case ... for the most part.
Nearly 80 percent of executives who responded to PwC's first-quarter survey said they expect revenues to increase at their respective companies over the next 12 months.
Some 55 percent of the executives expressed optimism about the 12-month outlook for the U.S. economy, up seven points from PwC's fourth-quarter survey.
"Overall sentiment regarding the direction of the domestic economy remained upbeat among U.S. industrial manufacturers in the first quarter," said Bobby Bono, U.S. industrial manufacturing leader for PwC.
Still, the upbeat results of PwC's first-quarter Manufacturing Barometer come with several asterisks.
Bono noted that "management teams are taking a more conservative approach to forecasting top-line performance for the year ahead, given the moderate recovery underway and uncertainty pertaining to fiscal policy."
The conservative approach played out in the revenue forecasts for 2013.
In fourth-quarter 2012, manufacturing executives projected an average revenue-growth rate of 5.2 percent for this year. In PwC's latest survey, however, executives forecast an average revenue-growth rate of 4.3 percent for this year.
'Waiting for Clarity on the World Stage'
Executives continue to be uneasy about the international markets.
Only 36 percent of executives expressed optimism regarding the 12-month outlook for global markets, while executives projected that international sales would comprise 32 percent of total revenue over the next 12 months, down from a forecast of 38 percent in fourth-quarter 2012.
"Views pertaining to the world markets have remained muted, with close to half of survey respondents expressing uncertainty," Bono said."As a result, we have witnessed a consistent pullback in overseas expansion plans during the past four quarters, with the first quarter of this year being at a low of 10 percent – the lowest it has ever been in almost a decade."
While manufacturers are cutting back on international expansion, they are ratcheting up spending on R&D, new-product launches and IT "as they focus on building market share and boosting revenues in a competitive domestic market," Bono said.
"It is clear that companies are keeping their cash closer to home and are waiting for clarity on the world stage before making decisions on investing internationally," he added.
Some 43 percent of U.S. manufacturers said they are planning major capital expenditures over the next 12 months, down from 47 percent in PwC's fourth-quarter survey.