Recent news of a shrinking cost differential between domestic and foreign companies has done little to brighten the spirits of U.S. manufacturers, according to new data from PricewaterhouseCoopers, which this week released its most recent barometer of manufacturing sentiment. The company’s quarterly survey, based on interviews with 50 U.S.-based multi-nationals, found that two-thirds of U.S.-based industrial manufacturers are pessimistic about the U.S. economy’s prospects over the next 12 months. Ninety percent of survey respondents said they believe the U.S. economy declined in the third quarter, a 13-point increase over the second quarter and up 70% from the same period last year.
The PWC survey found that the majority of manufacturers are most concerned with a lack of demand (82%) and decreasing profitability (64%) in the next year, surpassing concern over the cost of oil and other energy sources, which had topped the list of potential barriers to growth over the past year.
The PWC barometer follows by just a few days the release of a study by a collection of industry groups that shows the U.S. making progress toward controlling structural costs that have placed domestic manufacturers at a disadvantage against foreign competitors in recent years. In an update of a study first issued in 2003 and conducted again in 2006 by the National Association of Manufacturers (NAM), the Manufacturing Institute, and the Manufacturers Alliance/MAPI, the groups found that the overall structural cost burden shouldered by domestic manufacturers stands at 17.6% relative to the country’s nine largest trading partners. This figure represents a decrease from both the 2003 and 2006 findings, which were 22.4% and 31.7%, respectively.
Led by a reduction in employee benefit and health insurance expenses, as well as costs associated with pollution abatement programs and tort litigation, the narrowing cost differential was also helped by rising costs in other parts of the world.