The latest edition of the PricewaterhouseCoopers LLP Manufacturing Barometer reports that optimism about the U.S. economy is down slightly from last quarter, but still shows strength, with almost half (45 percent) of U.S. industrial manufacturers optimistic about the next 12 months, according to the Q2 2010 report. Only 12 percent of industrial manufacturers are pessimistic about the U.S. economy's prospects over the next 12 months, while 43 percent are uncertain. Of those marketing abroad, 38 percent are optimistic about the world economy over the next 12 months, down 15 points from last quarter. More respondents are uncertain, at 46 percent, but only 16 percent are pessimistic.

The majority of panelists (58 percent) believed the U.S. economy was growing in Q2 2010, marking the first quarterly survey since Q3 2007 for which a majority reported growth. Only 15 percent viewed the U.S. economy as declining. Of international marketers, only 45 percent viewed the world economy as growing in the second quarter, similar to the 44 percent reported last quarter. More viewed it as declining, up 11 points to 27 percent.

Expected international sales dipped in the second quarter of 2010 for industrial manufacturers marketing abroad. The projected contribution of international sales to total revenue over the next 12 months dipped slightly to 36 percent; down 4 points from last quarter's survey high of 40 percent but above the previous three quarters. Additionally, of respondents selling abroad, 42 percent reported an increase in sales, which dipped from last quarter but is notably above the prior three quarters. However, 24 percent reported a decrease in sales abroad, while 34 percent stayed about the same.

"The levels of uncertainty cited about prospects for both U.S. and global economies over the next year show that companies are still carefully navigating the sector's landscape with cautious hope for the future," said Barry Misthal, U.S. industrial manufacturing leader for PricewaterhouseCoopers. "While international sales dropped from last quarter, the fact that they are still significantly above the last three quarters of 2009 indicates that global manufacturing sales will most likely continue their upswing in performance, despite the present uncertainty."

Looking at the next 12 months, the projected average revenue growth rate among panelists doubled from 3 percent last quarter to 6 percent in Q2 2010, bringing it back into the normal range seen in this survey for a more stable economy. Seventy-three percent expect positive revenue growth for their own companies over the next year, with 30 percent forecasting double-digit growth (up 18 points) and 43 percent forecasting single-digit growth (up 20 points). The 30 percent forecasting double digits are directly responsible for the rise in the overall average projected growth.

For the second quarter in a row, legislative/regulatory pressures ranked highest among perceived barriers to growth over the next 12 months, with 63 percent of panelists naming it as a concern (down 10 points from last quarter). Taxation policies rose 14 points this quarter, cited by 57 percent. The number concerned about lack of demand dropped 13 points in Q2 2010 but remains a potential barrier according to 50 percent of respondents, followed by the monetary exchange rate, cited by 40 percent of panelists. On the positive side, decreasing profitability dropped 12 points this quarter, with only 35 percent citing it as a possible barrier to growth.

Hiring plans made a significant jump in Q2 2010. Over the next 12 months, 47 percent of panelists plan to add employees to their workforce, up 20 points from last quarter. Only 7 percent plan to reduce the number of full-time equivalent employees, and 46 percent expect to stay the same. Composite workforce hiring over the next 12 months was projected at a notably higher 1.8 percent, well above last quarter's 0.5 percent and the highest since Q4 2005. Of the 47 percent of respondents planning to hire, the most sought-after employees will be production workers and professionals/technicians, along with skilled labor.