Nearly 80 per cent of senior executives at small and medium-size US manufacturing companies are pessimistic about the prospects for economic growth, according to a survey to be published on Wednesday. Attitudes within the sector towards the benefits of globalisation have also deteriorated markedly since last year.
The report by RSM McGladrey, the consultancy, suggests the outlook for the US economy may be even gloomier than expected. Manufacturing has so far held up better than the service sector: US manufacturers defied bearish forecasts last month by boosting production for the first time since January, the Institute for Supply Management said last week.
Much of this was down to the resilience of companies that employ fewer than 2,000 workers. They account for about 40 per cent of US manufacturing production and make up 99 per cent of the country’s manufacturers, according to the National Association of
However, the McGladrey report suggests the sector is bracing for worsening conditions. Fewer than 40 per cent of respondents said their businesses were “thriving and growing” – down by 10 per cent from last year and 19 per cent from 2006. Meanwhile, the proportion who said their businesses were “declining” has tripled in the past two years.
Worryingly, the report indicates that small and mid-size manufacturers are retreating from the global economy just as large manufacturers, such as General Electric, Caterpillar and Deere, have offset falling sales at home by increasing market share internationally on the back of growth in emerging economies and the weak dollar.
More than half of the senior executives surveyed – up 10 per cent from 2007 – said globalisation had neither lowered their costs nor improved their margins, while the proportion of respondents moving production or services offshore had declined by 20 per cent during the past year.
“The global playing field is different today than it was even a year ago,” said Tom Murphy, the report’s main author. “The savings you generate by producing products with lower labour costs are more than eaten up by the higher energy costs to transport it back to the US.”
Nevertheless, those companies with a global strategy reported on average a 4 per cent higher gross margin.
The report also indicates the mood towards mergers and acquisitions has soured, with only 15 per cent of respondents relying on mergers or acquisitions of another business as a growth strategy, down from 37 per cent last year.
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