London: As the Euro crisis deepens, the US is expected to lead manufacturing's return to high-margin growth, according to KPMG's 2012 Global Manufacturing Outlook.
- Manufacturers cautiously optimistic, focused on top and bottom-line growth — Germans most upbeat in Europe
- Next wave of game-changing innovation underway in the manufacturing sector
- Focus on innovation will drive growth with emerging markets set to ramp up R&D activity
Manufacturers worldwide are setting their eyes on the US to drive growth. According to KPMG's 2012 Global Manufacturing Outlook: Fostering Growth through Innovation, 40 percent of the global manufacturing leaders believe that the US will account for the majority of sales and profits growth for manufacturers over the next two years, followed by China, India, Brazil and Germany.
The survey also reveals that business confidence among global manufacturing executives is high, with 76 percent of respondents being optimistic about their business outlook for the next 12 to 24 months.
Stephen Cooper, KPMG's UK head of manufacturing, said, "Despite no clear resolution to the Euro crisis on the table, global manufacturers are still optimistic about their business outlook for the short-medium term and are looking to the US to drive high-margin growth.
"In light of what is happening in Europe, the US and Asian markets are going to play an increasingly important role in the UK's manufacturing sector. For the UK, whilst UK manufacturers are cautiously optimistic about future sales and profitability, active government support, together with inward investment from overseas, is vital."
The survey also points to a renewed focus on innovation. The majority (72 percent) of global manufacturers say that the next wave of game-changing innovation for the sector is underway.
Cooper added, "After several years of focusing on cutting costs, many manufacturers realise that they have to invest in expanding their product and service offerings in order to remain competitive. Historically, periods of recession have been followed by growth but manufacturers don't simply want to rely on that. Therefore they are taking risks and committing their resources to innovation that may be groundbreaking for the sector and rewarding in the long-term."
Manufacturers from emerging markets outpaced those from developed markets by 10 and 14 percentage points, respectively, in their intent to increase 'radical' and 'fundamental innovation' in the next 12 to 24 months. Also, manufacturing executives who plan to increase sourcing activities in China and India in the same period were asked which types of activities they planned to do, more than half selected "R&D" for China, and more than three-quarters said "product development/design" for India.
Cooper said, "Globally, manufacturers have ramped up their innovation activities. This, in conjunction with increasing efficiency and adding value to their current services and products, will help them compete for higher-margin business. Manufacturers from the emerging markets want a larger stake of the higher value global market and are becoming a threat to their developed-market rivals.
"For the UK, this underlines the importance of research and development investment and also in getting appropriately skilled graduates from our universities into industry. This will help ensure the UK can compete on a global level and continue to retain its cutting-edge reputation as a nation of innovators. What's more, we then need to ensure these innovative businesses manufacture here."
Other key findings:
- Countries which will account for the majority of top and bottom-line growth over the next two years, respectively, are: US (43; 41 percent); China (30; 27percent); India (22; 21 percent); Brazil (17; 13 percent); and Germany (15; 17 percent);
- Nearly half of global respondents are placing both top (45 percent) and bottom-line growth (47 percent) as main priorities, followed by improved productivity/efficiency (36 percent);
- Amidst the eurozone crisis, 38 percent of manufacturers from Europe, the Middle-East and Africa (EMEA) believe that the manufacturing sector in currently undergoing 'transformational innovation';
- The vast majority (93 percent) of German manufacturers are optimistic about their company's outlook for the next two years — the highest level of optimism in EMEA;
- 36 percent of manufacturers from EMEA intend to increase sourcing from China, followed by India (25 percent), UK (24 percent), Brazil and Germany (20 percent);
- Nearly three-quarters of manufacturing leaders in EMEA are upbeat about their company's business outlook and four in ten are prioritising top-line (sales) and bottom-line (profits) growth for their organization;
- The US is again a key source for manufacturing companies in EMEA and a third of manufacturing leaders believe that the US will drive the global economic recovery over the next two years. They also cite China (32 percent), Germany (24 percent) and India (21 percent) as a source for sales and profits for their organization;
- The biggest challenge for 39 percent of manufacturers based in EMEA continues to be price volatility of key cost input, followed by uncertain demand (38 percent), intense competition and pressure on prices (36 percent) and risk, reliability and flexibility in the supply chain (35 percent);
- Almost half (48 percent) of the manufacturing companies based in EMEA will seek to invest more in cost management, followed by production capacity in high-growth markets (39 percent), new business models (31 percent) and innovation & R&D (30 percent).