Manufacturing, Service Execs Committed to Capital Investments, Despite Bleak Business Outlook for 2012: KPMG Survey
NEW YORK, Nov. 30, 2011 /PRNewswire/ — U.S. manufacturing executives will use what they perceive as a pause in the economic growth cycle to prepare for the future, expressing a firmer commitment to spending on capital improvements and manufacturing research and development (R&D) in 2012, according to KPMG International’s latest Global Business Outlook survey.
These same executives, who in the spring had broadly anticipated improved business activity in the year ahead, now expect a stagnant market during the period, and sentiment in the U.S. service sector also continued a downward trend.
Manufacturing: In the latest KPMG poll conducted in October, just half of the manufacturing executives said activity would rise, compared with June when 71 percent of them expected better business activity, up from a relatively strong 68 percent in February.
Globally, however, expectations for higher business activities continued dropping, to 42 percent of manufacturing respondents in October, compared with 55 percent in June and 61 percent in February.
Service: In the service sector, expectations that previous polls already showed were low have eased yet again. Fifty-five percent of U.S. service industry executives polled in October said they expected improved business activity, compared with almost 58 percent in June and a stronger 66 percent in February. Globally, just 44 percent of service executives polled in October expected improved activity, compared with 48 percent in June and 55 percent in February.
“KPMG’s survey findings underscore the ‘wait-and-see’ mood that has taken over this market of unprecedented uncertainty,” said Lynne M. Doughtie, vice chair – Advisory for KPMG LLP, the U.S. audit, tax and advisory firm. “However, we are finding many of our clients planning and making investments in their core infrastructure, and the survey reveals more manufacturing organizations are maintaining levels of research and development.”
Doughtie pointed out that while the number of U.S. manufacturing executives expecting higher R&D investment slipped slightly to 18 percent from 20 percent in June and 29 percent in February, the number who expected the steady levels of research rose to 68 percent, from 57 percent in June and 53 percent in February. Those who expected lowered R&D spending has held steady at about 5 percent throughout 2011. In addition, capital investments may experience a slight pull-back in the manufacturing sector, while remaining somewhat steady among service organizations, the study said.
Among U.S. manufacturing executives, more than 60 percent expect continued levels of capital spending in the coming 12 months, compared with 56 percent in June and 51 percent in February. Those who expected higher spending dropped only slightly to 19 percent in October, compared with 22 percent in June and a much stronger 31 percent in February. The KPMG survey found that 9 percent of U.S. manufacturing executives anticipate lower capital spending during the period, up from just under 6 percent in June.
The October survey findings showed little change from June among U.S. service sector respondents in their expectations for capital spending. Responses were unchanged among those who said spending would rise in the coming 12 months (23 percent) or remain the same (61 percent), while those who believe spending would drop rose by less than 1 percent to 13 percent.
“As the market meanders along, many companies are looking at how to invest idle cash in a way that will pay future dividends,” said Doughtie. “We’re seeing many that are upgrading IT systems, while everyone is monitoring the regulatory environment and working to improve their compliance programs to be sure they understand new rules of the road.
“In addition, companies have an eye on how to transform their organizations with a focus on new business models, leveraging potential new markets, enhancing their portfolio of products and services, and shopping for acquisitions to continue their growth as the market finds its footing,” said Doughtie.
KPMG’s survey showed more U.S. executives expecting little change across a number of areas indicators measured:
- Manufacturing
- R&D: The uncertainty of spending on research and development is dissipating. Eighty-six percent of survey respondents expect R&D spending in the coming year to be higher or remain the same, compared with 75 percent in June.. More sure footing on R&D expectations becomes evident as just 9 percent of executives surveyed said they did not know what R&D spending would be, less than half the nearly 20 percent of survey respondents in June who said they didn’t know how spending would play out.
- Capital Expenditure: Likewise, the number of executives who said they were unsure about spending levels in June (16 percent) dropped to just 12 percent in October, while more than 60 percent of executives expect steady levels of capital spending in the next 12 months, up four points from 56 percent in June . More than 19 percent of respondents said they expect higher spending on capital expenditure in the next year, off marginally from 22 percent in June.
- Revenue: Expectations for higher business revenues dropped to 49 percent of manufacturing executives polled in October, compared with 68 percent in June.
- New Business: Almost 49 percent of executives expect improvements in new business in the coming 12 months, compared with 66 percent in June.
- Profits: Just 43 percent of executives expect higher profits in the next year; 64 percent of those executives polled in June thought profits would be higher in 2012.
- Employment: Almost 30 percent of executives polled said they would be hiring more workers in the coming 12 months, compared with 36 percent of those polled in June who expected bigger payrolls.
- Services
- Capital Expenditure: Spending will remain relatively unchanged in the coming year, according to survey respondents. Twenty-three percent of service sector executives expect higher spending, unchanged since February, while 61 percent expect the same level of investment unchanged from June, but up from 57 percent in February, and 13 percent expect lower spending, up slightly from 12 percent in June to the same level as in February.
- Revenue: Nearly 52 percent of Service sector leaders expect higher revenue in the coming 12 months, down slightly from almost 58 percent in June.
- New Business: Fifty-two percent of executives polled expect higher revenue during the coming period, down from 55 percent in June.
- Profits: Higher profits were anticipated by just 47 percent of respondents, down from 53 percent in June.
- Employment: Expectations for payroll also declined, from 31 percent of executives in June anticipating an increase in hiring to 27 percent in October.
“Although there is not much upside in the sentiment of both manufacturing and service sector leaders, most see the market changing very little over the next twelve months, with only a slight uptick in those who believe their key indicators will fall in the year ahead,” said Doughtie.
The current KPMG Global Business Outlook Survey is based on responses from 6,367 companies representing manufacturing and service providers in 17 countries. Participants included 244 U.S. manufacturing executives and 192 U.S. service-industry executives. See tables below for additional information.
About KPMG International
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 150 countries and have 138,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (“KPMG International.”) KPMG International’s member firms have 138,000 professionals, including more than 7,900 partners, in 150 countries.
Editors: The following provide the percentage of executives who anticipate business activity, business revenue, profit and employment will be higher, the same or lower at their company over the next 12 months, as well as those who said they did not know.
MANUFACTURING
---
% of
respondents Higher Same Lower Don't Know
----------- ------ ---- ----- ----------
Bus. Activity US BRIC EU Global US BRIC EU Global US BRIC EU Global US BRIC EU Global
------------- --- ---- --- ------ --- ---- --- ------ --- ---- --- ------ --- ---- --- ------
Oct. 2011 50 37 39 42 41 49 32 39 7 13 24 20 2 1 5 4
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
June 2011 71 43 51 55 24 46 31 32 4 10 14 8 2 1 4 2
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Feb. 2011 68 59 61 61 33 38 30 32 4 6 10 8 2 1 4 3
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Oct. 2010 57 56 52 51 33 38 30 32 4 6 13 10 6 1 5 6
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Bus. Revenue US BRIC EU Global US BRIC EU Global US BRIC EU Global US BRIC EU Global
------------ --- ---- --- ------ --- ---- --- ------ --- ---- --- ------ --- ---- --- ------
Oct. 2011 49 41 37 41 39 45 30 37 5 13 27 16 6 1 7 6
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
June 2011 68 47 51 54 25 42 29 30 4 9 15 11 4 2 5 6
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Feb. 2011 65 61 60 59 27 31 23 27 4 7 12 10 3 1 5 4
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Oct. 2010 52 58 52 49 36 35 27 32 3 6 15 12 9 1 6 8
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Profits US BRIC EU Global US BRIC EU Global US BRIC EU Global US BRIC EU Global
------- --- ---- --- ------ --- ---- --- ------ --- ---- --- ------ --- ---- --- ------
Oct. 2011 43 36 30 35 42 47 31 39 7 17 31 18 7 1 8 8
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
June 2011 64 41 41 47 27 45 30 32 3 11 22 14 6 2 7 7
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Feb. 2011 62 48 45 49 27 40 27 31 6 10 20 13 5 1 8 6
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Oct. 2010 47 48 41 41 39 41 30 36 3 10 21 14 11 5 8 9
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Employment US BRIC EU Global US BRIC EU Global US BRIC EU Global US BRIC EU Global
---------- --- ---- --- ------ --- ---- --- ------ --- ---- --- ------ --- ---- --- ------
Oct. 2011 30 22 22 24 59 69 52 60 9 8 22 13 3 1 4 3
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
June 2011 36 24 30 28 52 70 50 58 5 5 17 10 7 1 3 4
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Feb. 2011 41 35 33 33 52 60 48 55 3 5 15 8 4 0 4 4
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Oct. 2010 28 27 30 27 63 66 48 58 3 6 18 10 6 0 3 4
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Input Prices US BRIC EU Global US BRIC EU Global US BRIC EU Global US BRIC EU Global
------------ --- ---- --- ------ --- ---- --- ------ --- ---- --- ------ --- ---- --- ------
Oct. 2011 34 36 38 33 53 50 32 46 7 13 23 14 5 1 7 6
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
June 2011 46 46 57 47 40 44 27 38 3 9 12 8 11 1 5 7
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Feb. 2011 50 59 75 55 40 37 15 33 7 4 5 8 3 0 5 4
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Oct.2010 25 52 62 39 60 43 23 45 3 4 10 8 13 1 5 8
-------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Output Prices US BRIC EU Global US BRIC EU Global US BRIC EU Global US BRIC EU Global
------------- --- ---- --- ------ --- ---- --- ------ --- ---- --- ------ --- ---- --- ------
Oct. 2011 28 26 30 25 64 63 44 57 3 10 19 12 6 1 8 6
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
June 2011 38 32 43 34 48 62 39 50 3 5 12 9 11 2 5 7
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Feb. 2011 45 43 53 41 46 53 32 45 4 4 10 10 5 0 5 5
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Oct. 2010 22 40 43 28 67 54 36 54 2 6 15 11 9 1 6 7
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
May not add to 100% because of rounding.
----------------------------------------
SERVICES
---
% of
respondents Higher Same Lower Don't Know
----------- ------ ---- ----- ----------
Bus. Activity US BRIC EU Global US BRIC EU Global US BRIC EU Global US BRIC EU Global
------------- --- ---- --- ------ --- ---- --- ------ --- ---- --- ------ --- ---- --- ------
Oct. 2011 55 43 36 44 39 50 43 43 5 7 16 10 2 1 5 3
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
June 2011 58 43 46 48 37 50 36 40 5 6 13 10 0 1 4 2
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Feb. 2011 66 52 56 55 28 44 29 33 4 4 12 9 3 1 3 3
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Oct. 2010 52 50 52 47 39 44 33 39 6 6 10 11 4 1 5 4
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Bus. Revenue US BRIC EU Global US BRIC EU Global US BRIC EU Global US BRIC EU Global
------------ --- ---- --- ------ --- ---- --- ------ --- ---- --- ------ --- ---- --- ------
Oct. 2011 52 45 36 42 37 47 37 40 8 8 21 14 4 1 7 5
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
June 2011 58 44 45 47 36 46 34 38 7 7 16 12 0 2 6 3
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Feb. 2011 57 50 52 51 32 44 30 34 7 6 14 12 4 1 4 4
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Oct. 2010 47 48 49 43 44 44 31 40 3 8 13 12 6 1 6 5
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Profits US BRIC EU Global US BRIC EU Global US BRIC EU Global US BRIC EU Global
------- --- ---- --- ------ --- ---- --- ------ --- ---- --- ------ --- ---- --- ------
Oct. 2011 47 39 30 37 37 50 37 41 8 10 25 15 8 1 8 7
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
June 2011 53 42 37 42 39 47 35 40 5 9 21 13 2 2 7 5
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Feb. 2011 58 46 44 47 31 46 31 35 6 7 20 12 5 2 5 5
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Oct. 2010 41 43 42 39 48 49 33 43 3 7 18 12 8 1 7 6
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Employment US BRIC EU Global US BRIC EU Global US BRIC EU Global US BRIC EU Global
---------- --- ---- --- ------ --- ---- --- ------ --- ---- --- ------ --- ---- --- ------
Oct. 2011 27 28 22 24 65 67 56 64 6 5 18 9 3 1 4 3
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
June 2011 31 26 26 26 62 68 53 62 4 5 17 9 2 1 4 3
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Feb. 2011 28 30 31 27 65 65 50 62 4 3 15 8 5 1 5 5
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Oct. 2010 25 27 28 24 66 69 52 63 4 3 15 8 5 1 5 5
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Input Costs US BRIC EU Global US BRIC EU Global US BRIC EU Global US BRIC EU Global
----------- --- ---- --- ------ --- ---- --- ------ --- ---- --- ------ --- ---- --- ------
Oct. 2011 28 43 41 31 65 53 41 58 2 3 8 5 5 1 9 5
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
June 2011 24 44 42 29 67 51 40 58 2 4 8 6 8 2 10 7
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Feb. 2011 24 46 47 31 66 49 35 55 4 3 9 7 7 2 9 6
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Oct. 2010 30 36 39 29 58 58 41 54 4 3 9 9 9 2 11 8
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Output Charges US BRIC EU Global US BRIC EU Global US BRIC EU Global US BRIC EU Global
-------------- --- ---- --- ------ --- ---- --- ------ --- ---- --- ------ --- ---- --- ------
Oct. 2011 27 23 25 22 63 73 60 65 3 3 10 7 7 1 5 5
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
June 2011 30 24 27 25 63 71 55 63 1 3 12 7 7 2 5 5
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Feb. 2011 24 22 31 23 67 74 51 64 3 3 14 8 7 1 5 5
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Oct. 2010 21 20 26 19 69 75 54 66 2 4 13 9 8 1 7 6
--------- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
May not add to 100% because of rounding.
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SOURCE KPMG LLP
