Optimism regarding the prospects of the U.S. economy during the next 12 months increased among U.S. industrial manufacturers to 68% during the fourth quarter of 2014, up 11 points from 57% in the previous quarter, according to new report release on Jan. 21 by PwC.
The same sentiment prevailed with regard to global growth, according to the Q4 2014 Manufacturing Barometer. Up eight points from 30% in the third quarter, manufacturers reported a 38% rating. It was however down from 47% in last year’s fourth quarter.
“Economic sentiment has improved among U.S. manufacturers and we are seeing an upswing in their confidence levels, leading to increased plans for hiring and operational spending,” said Bobby Bono, PwC’s U.S. industrial manufacturing leader.
“Management teams are primarily focusing on hiring skilled workers, developing new products and investing in research and development, in an effort to further strengthen core competencies, support growth and build market share,” Bono added. “However, management teams still remain guarded on the world stage where a high level of uncertainty has prevailed.”
While guarded the companies are still planning to hire with 60% said they would add employees to their workforce over the next 12 months, up from 52% in the third quarter and in line with last year’s fourth quarter.
Overall, the total net workforce growth projection rose to 1.1% in the fourth quarter, up from 0.4% in the third quarter and 0.5% in the fourth quarter of 2013.
What hasn’t changed, however, is a shortage of skilled workers across the U.S. industrial manufacturing sector, as two-thirds (64%) of respondents cited a need to fill certain skill gaps in their businesses over the next 12-24 months.
The biggest skill gaps identified were in skilled labor (75%) and in middle management (41%). Further highlighting the issue, over the past year, two-thirds of U.S. industrial manufacturers also reported having open positions that they were unable to fill with experienced or skilled employees.
In order to begin filling the gap, 78% of U.S. industrial manufacturers plan to hire new skill function employees over the next 12-24 months with the broadest needs in engineering/design (62%), manufacturing (44%) and R&D (28%).
“Management teams appear to be shifting outlays from capital spending to investing in people and products,” Bono added. “However, they have continued to highlight concerns regarding the lack of qualified workers, particularly in skilled labor. This is a longstanding issue that will need to be addressed through improved worker training and resources as industrial manufacturing processes around new and disruptive technologies become increasingly complex.”
Other study highlights include:
- Plans for operational spending rose to 82% of respondents, the highest level in nine quarters and up 13 points from 69% recorded in the third quarter and 73% in last year’s fourth quarter.
- Plans for new product or service introductions increased to 52%, up significantly from 43% in the third quarter, while plans for spending on research and development increased 11 points to 47% from 36% in the third quarter.
- Plans for new investments of capital remained healthy with 43% of respondents indicating increased outlays in the next 12 months, up from 36% in the previous quarter and in line with the fourth quarter of last year.
- Plans to develop new facilities abroad increased to 18%, up from 9% in the third quarter and 8% in the fourth quarter of 2013.
When asked about roadblocks to growth over the next year, 32% singled out legislative/regulatory pressures as the major headwind to growth over the next 12 months, a sharp 27-point drop from 59% last quarter and 15-point drop from 47% in the fourth quarter of 2013.
This decrease was followed by lack of demand, which was cited by 35% of respondents, down from 43% during the third quarter.