Manufacturing profits

Manufacturing and service providers in the United States and the BRIC countries — Brazil, Russia, India and China — expressed greater confidence in a 2010 economic turnaround than those in other nations represented in KPMG International’s most recent Global Business Outlook Survey.

"Some analysts have noted that recent improvements in corporate earnings have resulted mainly from cost savings rather than revenue growth," said Mark Goodburn, KPMG vice chair and head of advisory for the U.S. firm. "The challenge ahead for many companies is to ensure that all of the good work they have put into cost optimization will be sustainable as they shift back to a growth agenda."

KEY SURVEY FINDINGS
• U.S. manufacturing respondents expect a rise in the U.S. manufacturing sector driven by growth in new orders, a steady increase in factory utilization, a return to higher research and development investments, and an upturn in employment to meet demonstrated demand.

• Service-sector executives anticipate business activity to rise, employment to rise, but at a slower pace than demands, high daily costs to meet labor, outsourcing and raw material costs.

• The degree of market optimism or pessimism for each of the survey categories is indicated by a "net balance," which can vary from negative 100 (pessimism) to positive 100 (optimism), with a value of zero signalling a neutral outlook. The net balance figure is calculated by deducting the percentage number of survey respondents expecting deterioration in a category — profit, for example — from the percentage of respondents expecting improvement.

• Growth in manufacturing business activity earned a net balance of 54, compared with an overall global ranking of 42.9.

• Increased manufacturing revenue had a net balance of 49.8, compared with a global average of 37.4.

• Manufacturing employment was at a 20 net balance, compared with just 7.8 globally.

• U.S. manufacturing capital expenditure was 13.4, compared with 10.4 on the global market.

• Manufacturing research and development was rated 16.4, against 17.1 globally.

• Growth in service sector business activity earned a net balance of 65.6, compared with an overall global ranking of 46.5.

• Service sector employment was at a 28.4 net balance, compared with just 16.9 globally.