Optimism Decreases Among Consumer Products Companies

The first-quarter Consumer Products Barometer, released today by PricewaterhouseCoopers (PwC, New York) Retail & Consumer Industry Practice, reports that only 50% of consumer products companies are optimistic about the U.S. economy over the next year, down from 72% last quarter.

John Maxwell, leader of PwC's Retail & Consumer Industry Practice, attributes the bleak economic outlook to concerns over potential inflationary pressures on the domestic economy in addition to recent skyrocketing oil and energy prices. However, the Barometer also found that 67% of executives are upbeat about the global economy and half of survey respondents are planning to expand to new markets abroad.

The Barometer reports on other economic factors affecting the retail and consumer products industry and findings detail executives' thoughts on new investments of capital, revenue growth projections, hiring plans and political risks.

“As an industry driven by commodity pricing, consumer products companies are constantly affected by rising input costs and executives are showing concern about the possible impact of inflationary pressures on our economy,” explained Maxwell. “While the Barometer found that there is a substantial concern over the slowing economy, it was surprising that 70% of executives believe the domestic economy is actually growing.”

Nearly half of consumer products executives surveyed are planning major new investments of capital (48%) within the next year, an eight percentage-point decrease from the previous quarter. Of those companies increasing their investment dollars, most plan to roll out new product/service introductions (64%) and half will ramp up information technology (50%). However, only 32% of companies are investing in facilities expansion, an 18% drop from last quarter.

The Barometer also found that three-quarters of consumer products companies are pursuing other business initiatives over the next 12 months. Reflecting the renewed confidence in the global economy, 50% of respondents are planning to expand to new markets abroad. This is a 15% again above the all-industry consensus, a group of 130 large, multinational companies spanning a wide array of service, technology and manufacturing companies. In addition, 36% of executives are planning some sort of M&A activity, with most executives hoping to acquire another business (30%).

To read the full report, visit www.pwc.com.

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