Capital Spending Plans on the Rise Among U.S. Industrial Manufacturers

Companies putting cash to work as competitive pressure grows M&A plans increase as companies look to cement leadership, add talent and strengthen technologies

Optimism regarding the direction of the domestic economy remained positive among U.S. industrial manufacturers during the second quarter of 2014, according to the Q2 2014 Manufacturing Barometer, released by PwC US. In addition to the positive sentiment, PwC’s report showed a rise in capital spending plans among industrial manufacturers as they focus on utilizing their cash positions to strengthen their products, add personnel and secure technology in a highly competitive market.

The survey found that 52% of industrial manufacturers plan major new capital expenditure investments in  spending, up 13 points from the March 2014 survey. Manufacturers are also increasing shorter-term spending with 75% planning increased operational spending, led by research & development, introductions of new products or services and information technology. More than a third also plan to be engaged in mergers & acquisition activity, with 35% planning to buy another business.

“We saw a notable increase in indications for both long-term capital investment and short-term spending plans during the second quarter,” said Bobby Bono, PwC’s U.S. industrial manufacturing leader. “Companies have maintained historically high levels of liquidity and are increasingly looking to put this money to work in strengthening their operations, adding talent and improving technology in a highly competitive marketplace. Plans for R&D spending reached the highest level in the past five quarters, as management teams look to differentiate their products and enhance the value proposition they offer to their customers. This comes against a backdrop of sustained optimism regarding the domestic economy, coupled with a continued high level of uncertainty regarding the direction of global commerce.”

Regarding actual company growth expectations, 77 percent of survey respondents expect positive revenue growth for their own companies in the next 12 months, with nine percent forecasting double-digit gains and none anticipating decreased revenues. The projected average revenue growth rate for own-company revenue over the next 12 months was 5.2 percent, consistent with last quarter’s 5.3 percent, and above the 4.6 percent recorded in the second quarter of 2013.

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