U.S. executives continued to express stronger optimism for improved business activity over the next 12 months, compared with their European counterparts who anticipate stagnant or even worsening conditions ahead, according to the latest KPMG Global Business Outlook survey by KPMG International.
U.S. manufacturing executives continued to show the strongest sentiment among 6,200 respondents worldwide, with 73 percent expecting improved business activity over the next 12 months, compared with 71 percent in February and 65 percent last October. Meanwhile, among U.S. service industry executives, 65 percent of survey respondents expected higher business activity in the period, compared with 63 percent in February, and 70 percent in October.
"Expectations for greater business activity moved up again among U.S. executives, which is encouraging, but the slight drop in the European Union is likely a sign that market uncertainties continue to moderate global expansion," said Mark A. Goodburn, vice chairman and head of advisory for KPMG LLP, the U.S. audit, tax and advisory firm. "U.S. executives are seeing signs of an increase in business activity, prompting anticipation for stronger revenue flow, profitability and hiring in the coming months.
"Confidence overall in the BRIC nations has declined, but as a direct response to government measures to rein in super-charged economies," said Goodburn. "BRIC nations are far from struggling with market volatility or other external factors like their European counterparts."
Goodburn noted that global survey findings are being compared against low-water marks set as the economy reached bottom during 2009.
"There's no question overall U.S. sentiment is in a significantly better position than in February, though positive mood swings one day can turn sour the next, depending on the day's economic news," said Goodburn. "It appears that stimulus funding has helped the economic engine keep running." He noted that U.S. manufacturing executives expect higher profit, revenue and employment in the coming 12 months, while their service industry counterparts were not as optimistic, though still more positive than February.
"With stronger optimism around capital expenditures and employment, and with many businesses sitting on cash reserves, businesses could spark sustained positive momentum by translating their confidence into greater investment. Until that happens though, this prevailing optimism could keep things idling or achieving small milestones, rather than putting us in the fast lane to strong growth," Goodburn said.
The KPMG survey showed U.S. executives' expectations for higher manufacturing profits rose to 67 percent from 63 percent, but down from 60 percent to 51 percent among BRIC executives and up by only 1 percent to 43 percent in Europe. Globally, profit expectations remained relatively flat over the last three survey periods, at 51 percent in the current poll, 52 percent in February and 50 percent in October.
Anticipated Strong U.S. Manufacturing Hiring
U.S. manufacturing executives coupled their growing enthusiasm for the next 12 months with a significant uptick in the prospects for hiring, with 45 percent of them saying employment will be higher in the coming 12 months, compared with just 34 percent in February. By comparison, the EU also showed a gain, from 24 percent to 29 percent in manufacturing hiring, while the BRIC nations - Brazil, Russia, India and China - showed manufacturing employment expectations down from 40 percent to 32 percent. Service-industry hiring expectations, however, remained flat globally.
"With a generally positive U.S. outlook," said Goodburn, "we've seen a marked increase in CEOs preparing to aggressively pursue growth opportunities by re-evaluating their business models, shopping for acquisition targets, and strategically divesting non-core assets, while at the same time enhancing their risk management to ensure the ship is secure as they transform their organizations."
Following is select data from the KPMG Global Business Outlook Survey:
U.S. Manufacturing Sector Executives
-- Business Activity: Optimism continued to grow among U.S. manufacturing
executives, 73 percent of whom said business activity would be higher
in the coming 12 months, up from 71 percent in February and 65 percent
last October; just under 4 percent said it would be lower, down again
from nearly 5 percent in February and almost 11 percent in October.
Globally, 60 percent of manufacturing executives expected improvement,
down slightly from 61 percent in February but still higher than
October's 57 percent.
-- Employment: U.S. executives indicated a significant rise in higher
employment, from 34 percent in February to more than 45 percent in the
current survey; 40 percent said it would remain unchanged, and less
than 5 percent said it would be lower, compared with more than 6
percent in February and as much as 12 percent expecting lower
employment back in October.
-- Business Revenue: Seventy percent of respondents expect revenue to
rise in the coming 12-month period, up from 67 percent in February and
from 62 percent in October; just 3 percent said revenues would be
lower, down by half from the February figure of 6 percent, and 12
percent in the October polling.
-- Profit: Almost 67 percent of U.S. manufacturing executives expected
higher profits in the coming 12 months, up from 63 percent in February
and 60 percent last October; just 3 percent expect lower profits, down
from 6 percent in February and 14 percent in October.
U.S. Service Sector Executives
-- Business Activity: Sixty-five percent of service sector executives
expect higher activity in the coming 12 months, up from 63 percent in
February yet still short of the 70 percent that expected higher
activity last October; 31 percent said activity would be the same in
the coming period, a slight uptick from the 30 percent mark in
February; 3 percent who said activity would be lower was unchanged
from February.
Globally, 53 percent of service executives expected improvement, unchanged from February. Just 49 percent of EU executives in the services sector expected higher activity, down from 53 percent in February, while just 51 percent of BRIC countries' executives anticipated a rise in activity, down markedly from 62 percent in the previous survey.
-- Employment: The percentage of U.S. service sector respondents who
expected higher employment in the coming year continued to rise
slightly to 34 percent in the current survey, up from 33 percent in
February, and from 32 percent October; and 58 percent of the current
respondents said the employment picture would not change in the next
12 months, compared with 59 percent in February and 62 percent in
October.
-- Business Revenue: Sixty-four percent of executives expected revenue to
be higher compared in the coming period compared with 61 percent in
February, but still not as bullish as October, when 69 percent of
respondents expected higher revenues in the coming year. Thirty-one
percent expected revenue to be the same in the next 12 months, up
slightly from 30 percent in February and still higher than the nearly
26 percent in the October survey.
-- Profit: Sixty-one percent of respondents expected a rise in profit,
compared with 60 percent in February; those expecting lower profits
remain unchanged at 5 percent; and 31 percent expected profits to be
the same for the period, up from 27 percent in February.
The current KPMG Global Business Outlook Survey is based on responses from 6,200 companies representing manufacturing and service providers in 17 countries. More than 322 U.S. manufacturing executives and 237 U.S. service-industry executives participated.
NOTE: The following grids describe the percentage of executives who anticipate business activity, business revenue, profit and employment will be higher, the same or lower at their company over the next 12 months, as well as those who said they did not know.
MANUFACTURING
% of
respondents
Higher Same
Bus.
Activity US BRIC EU Global US BRIC EU Global
June 2010 73 55 56 60 16 35 29 25
February
2010 71 68 57 61 19 28 25 22
October 2009 65 61 51 57 24 31 29 25
Bus. Revenue US BRIC EU Global US BRIC EU Global
June 2010 70 58 55 57 18 32 25 25
February
2010 67 66 53 57 20 27 23 21
October 2009 62 64 48 54 24 27 27 23
Profits US BRIC EU Global US BRIC EU Global
June 2010 67 51 43 51 19 36 30 27
February
2010 63 60 42 52 23 28 29 23
October 2009 60 56 38 50 21 32 30 24
Employment US BRIC EU Global US BRIC EU Global
June 2010 45 32 29 32 40 62 50 51
February
2010 34 40 24 29 55 54 52 53
October 2009 32 35 17 25 53 61 52 53
% of
respondents
Lower Don't Know
Bus.
Activity US BRIC EU Global US BRIC EU Global
June 2010 4 9 12 10 8 1 3 6
February
2010 5 4 14 10 5 1 4 7
October 2009 11 7 17 14 1 1 3 5
Bus. Revenue US BRIC EU Global US BRIC EU Global
June 2010 3 10 15 12 9 1 5 7
February
2010 6 6 19 14 6 1 5 8
October 2009 12 8 21 17 2 1 5 6
Profits US BRIC EU Global US BRIC EU Global
June 2010 3 11 21 14 11 2 7 9
February
2010 6 11 23 17 7 1 6 9
October 2009 14 10 26 18 5 2 7 8
Employment US BRIC EU Global US BRIC EU Global
June 2010 5 6 19 11 10 1 2 6
February
2010 6 6 21 14 5 1 4 5
October 2009 12 4 29 18 4 1 2 4
May not add to 100 % because of rounding.
SERVICES
% of
respondents
Higher Same
Bus.
Activity US BRIC EU Global US BRIC EU Global
June 2010 65 51 49 53 31 45 33 35
February
2010 63 62 53 53 30 34 30 33
October
2009 70 56 50 56 25 39 33 32
Bus.
Revenue US BRIC EU Global US BRIC EU Global
June 2010 64 52 46 51 31 42 32 35
February
2010 61 61 48 50 30 35 30 33
October
2009 69 58 45 53 26 36 33 31
Profits US BRIC EU Global US BRIC EU Global
June 2010 61 47 39 47 31 45 35 38
February
2010 60 57 40 48 27 37 33 33
October
2009 64 55 39 49 28 38 30 35
Employment US BRIC EU Global US BRIC EU Global
June 2010 34 33 25 28 58 63 55 60
February
2010 33 36 24 27 59 60 54 59
October
2009 32 35 24 27 62 62 53 60
% of
respondents
Lower Don't Know
Bus.
Activity US BRIC EU Global US BRIC EU Global
June 2010 3 3 15 9 1 1 3 3
February
2010 3 3 13 9 5 1 4 4
October
2009 5 4 12 9 1 1 4 3
Bus.
Revenue US BRIC EU Global US BRIC EU Global
June 2010 3 5 17 11 1 1 4 3
February
2010 3 3 18 12 6 2 4 5
October
2009 4 5 18 12 1 1 5 4
Profits US BRIC EU Global US BRIC EU Global
June 2010 5 7 21 12 3 2 5 3
February
2010 5 5 21 12 8 2 6 6
October
2009 6 6 24 13 2 1 6 3
Employment US BRIC EU Global US BRIC EU Global
June 2010 4 4 17 9 5 1 3 4
February
2010 4 3 19 10 5 2 3 3
October
2009 4 3 19 10 2 1 4 3
May not add to 100 % because of rounding.