Dismal Outlook on Global Economy Fueled by Media Hype

When the U.S. recession kicked into high gear around 2008, albeit rightfully so, headlines of doom and gloom were splashed across the global media network. Some five years later, despite solid signs of recovery in the U.S., it seems the media has not quite received the message.

When the U.S. recession kicked into high gear around 2008, albeit rightfully so, headlines of doom and gloom were splashed across the global media network. Some five years later, despite solid signs of recovery in the U.S., it seems the media has not quite received the message.

Bobby Bono, leader of PricewaterhouseCoopers’  (PwC) Industrial Manufacturing Practice

Bobby Bono is the leader of PricewaterhouseCoopers’ (PwC) Industrial Manufacturing Practice and routinely counsels manufacturers on ways to optimize and refine business practices to compete in a less-than-favorable economy. As such, Bono brings a unique perspective to the conversation of why uncertainty lingers and continues to stifle new investment in the U.S. And, he has the evidence to back it up. PwC publishes a “Manufacturing Barometer” once each quarter that surveys some 60 executives from global companies about the health of their respective companies, and the overall economy. Bono says the third-quarter 2012 survey found a stark contrast between optimism within individual companies versus optimism in the overall economy.

“Just like what you might hear or read in the news, these executives are not optimistic about the world economy, and they are getting more muted about the U.S. economy,” Bono began. “But when you start asking questions about their individual companies, they are a lot more positive. To me, that’s a stronger statement because they know their own individual company a lot better than they know the macro environment.”

Bono says despite the lack of certainty in the global economy, PwC’s third-quarter Manufacturing Barometer clearly illustrates that manufacturers expect good things in the coming year, with some 82 percent predicting revenue growth in 2013. Many also plan to hire additional employees, as well as invest in new products and research and development.

But optimism in the coming year for the U.S. economy dropped to 37 percent in the third quarter of 2012, down 15 points since the second quarter. Sentiment regarding the 12-month outlook for the world economy among manufacturers who market abroad remained low at 29 percent, although this level improved by 16 points since the second quarter. Still, the majority of respondents (54 percent) expressed uncertainty regarding the 12-month outlook for both the U.S. and global economies.

“So what that tells you is, in this macro environment, they believe what the news is telling them about the world economy, but they feel confident in how their own company can navigate through that uncertainty,” said Bono.

Bono cited a perceived lack of product demand, legislative and regulatory pressures, and oil and energy prices as the three biggest factors perpetuating little optimism in the global economy.

Since the recession, he says manufacturers have become much more astute at adapting to harsher economic climates, having been required to do so just a handful of years ago. His most valuable piece of advice for manufacturers today is to never lose focus on the customer.

“It doesn’t really matter if taxes go up with this fiscal cliff—if customers have a need and they can fulfill that need, they should not be as concerned about this macro environment. The whole can come down, but their slice is going to stay the same.”

Bono says he routinely advises manufacturers to simplify their business and product offerings to focus on specific customer needs and how to best meet those needs.

“We are still seeing companies making investments, they are just a lot more strategic in how they make those investments,” Bono said. “They want to understand what the return is, if there is a real need for the customer and they are focusing on that.”

January 21, 2013

Some opinions expressed in this article may be those of a contributing author and not necessarily Gray.

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