OPTIMISM INCREASES IN MANUFACTURING SECTOR
26 July 2004
ORDER AND REVENUE PREDICTIONS MOST BUOYANT SINCE SURVEY BEGAN IN 2002
The latest Capgemini / CIPS business outlook survey reveals that manufacturers are even more optimistic about future growth opportunities than they were at the end of 2003. Around two-thirds of all companies expect revenues and orders to rise over the next twelve months, whilst expectations for employment and capital expenditure growth have also hit new highs.
The most commonly cited drivers of revenues for the coming year were stronger economic growth, new product development, as well as increased sales and marketing expenditure. Although the expected rise in profits was less than December’s survey, due to higher costs affecting margins, over half (57%) of manufacturers are positive that they will experience an increase in returns. A mere 14 percent expected a possible decline.
Encouragingly, capital expenditure is also expected to show the strongest rise ever recorded by this study. Over a quarter (27%) of respondents anticipate growth in spend compared to 18 percent forecasting decline. Growth of overall profits is expected to finance product research and development with nearly a quarter (21%) of manufacturers anticipating an increase in R&D spend.
Like December’s results, this latest survey also shows the outlook for employment improving - with 29 percent of organisations expecting to see staff levels boosted. Despite this optimism, one-in-five still expect a decline in employee levels due to the need to protect margins from higher raw material prices. However, overall capacity utilisation is set to increase at the fastest rate in this survey’s history as a result of workloads rising.
On the negative side, higher costs were cited as the biggest threat to revenues, which would mean an increase in output prices, therefore impacting on competitiveness. High oil prices, rising interest rates, and upward pressure on wages and salaries were also cited as potential sources of higher costs over the coming year. The inflation outlook deteriorated too with nearly half (49%) of manufacturers expecting the annual rate of growth of input prices to accelerate over the coming year. Over forty percent (41%) of respondents anticipate the annual rate of output price inflation to increase as they pass on higher raw material costs to their customers via increased charges for their goods.
Paul Sloman, Executive Consultant Capgemini UK plc comments, “Overall the manufacturing market is showing real signs of recovery. There is an optimistic feel to the industry with anticipation of stronger economic growth, particularly for those manufacturers who have moved up the value chain and can provide high value services such as supply chain and product development capabilities to domestic and foreign markets. However, there are still concerns for the majority of manufacturers including oversees competition, fuel costs, and interest rates. Survival is still the primary focus for many traditional manufacturers.”
Roy Ayliffe, Director of Professional Practice at The Chartered Institute of
Purchasing and Supply commented, “December’s survey set the scene for a real upturn
in the manufacturing sector and this survey demonstrates that the rest of the
year should continue in the right direction. The expected increase in input price
inflation and output prices also set to rise sharply over the coming months mean
manufacturers will be passing on higher costs to their customers, which could
have adverse affects on sales, therefore opening the way for cheaper competitors
from overseas. ”
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Notes to Editors:
* The survey reflects responses from 352 manufacturing companies that participate
in the highly regarded CIPS/Reuters UK Purchasing Managers’ Index monthly survey.
Data was collected in June 2004.
About Capgemini
Capgemini, one of the world’s foremost providers of Consulting, Technology and
Outsourcing services, has a unique way of working with its clients, which it calls
the Collaborative Business Experience. Through commitment to mutual success and
the achievement of tangible value, the company helps businesses implement growth
strategies, leverage technology, and thrive through the power of collaboration.
Capgemini employs approximately 55,000 people (as of January 1, 2004) and reported
2003 global revenues of 5.754 billion euros.
More information about individual service lines, offices and research is available
at www.capgemini.com
The Chartered Institute of Purchasing & Supply (CIPS)
The Chartered Institute of Purchasing & Supply (CIPS) is an international organisation, based in the UK, serving the purchasing and supply profession. Dedicated to promoting best practice, CIPS provides a wide range of services for the benefit of its 35,000 members and the wider business community.
CIPS provides a programme of continuous improvement in professional standards and raises awareness of the effective contribution management of supply markets makes to corporate, national and international prosperity. In 1992, CIPS was awarded a Royal Charter in recognition of this leading role.
CIPS
Liz Cullen - PR Manager
Tel: 01780 756777
liz.cullen@cips.org
