Economic sentiment among manufacturers softens from recent record high levels

Optimism regarding the direction of the domestic economy softened in Q2 2015 compared to the previous nine-year high recorded in Q1 among U.S. industrial manufacturers, according to the Q2 2015 Manufacturing Barometer released by PwC US, New York. Respondents also trimmed overall growth forecasts and spending plans, reflecting caution around the strengthening of the U.S. dollar and potential rise in domestic interest rates, as well as continued uncertainty regarding the direction of the global economy.

Optimism regarding the prospects of the U.S. economy during the next 12 months decreased to a still healthy 69 percent among manufacturers in Q2, compared to 76 percent in Q1, but increased from 65 percent in Q2 2014. Optimism about the world economy declined to 38 percent, compared to 42 percent in the previous quarter. Projected company revenue growth for the next 12 months slowed to 4.9 percent in Q2, compared to 5.1 percent in the previous quarter.

“As a result of several macroeconomic factors taking shape, U.S. industrial manufacturers seem to be taking a more measured view of business conditions in the year ahead,” said Bobby Bono, U.S. industrial manufacturing leader for PwC. “Slower GDP growth, the impact of the strong dollar, issues in China, and uncertainty in Europe are among the developments that are likely causing industrial manufacturers to reassess the broader economic picture, as well as spending plans across a range of categories. Still, the overall outlook for U.S. industrial manufacturers appears to be positive, marked by relatively high levels of optimism regarding both the domestic economy and company revenue growth forecasts.”

Reflecting the more cautious outlook, operational spending plans dropped to 75 percent, down from a two-year high of 83 percent in the first quarter. According to the survey, sentiment regarding capital spending also trailed off, with only 34 percent of respondents indicating plans for major new investments of capital in the year ahead, down from 52 percent in the first quarter.