Thirteen Percent of Manufacturers Confident about U.S. Economy; Industry Members Diversify to Survive
September 19, 2011

By Sahely Mukerji, smukerji@glass.com

The results of Grant Thornton LLP’s most recent business optimism index (BOI) captures the mood of the glass industry. The quarterly survey of U.S. manufacturing business leaders show that only 13 percent believe the economy will improve in the next six months, down significantly from those who expressed hope six months ago.

Economic Forecasts
2/2011
5/2011
8/2011
Believe U.S. economy will improve
60%
40%
13%
Believe U.S. economy will get worse
3%
26%
40%
Very or somewhat optimistic about own business
91%
80%
53%
Very or somewhat pessimistic about own business
9%
20%
47%
Plan to increase staff
44%
44%
21%
Plan to decrease staff
6%
16%
35%
Source: Grant Thornton

"While the numbers posed are most likely accurate and reflect the 'trend,' we remain open to exploring news areas and are finding pockets that are providing a positive bump or two," says Tom Kaiser, president of Cardinal IG in Eden Prairie, Minn. "The approaching winter months however will make things even more difficult for all engaged in this aspect of our GDP."

Serge Martin, vice president of AGC Building Products in Alpharetta, Ga., also agrees with the BOI trend. "AGC Glass Co. North America agrees with the general consensus of the other executives surveyed, that U.S. economy will take longer to recover than originally projected," he says. "We continue to focus on improving our processes and expanding our capabilities, to build flexibility to business. This flexibility allows us to respond quickly to changes in demand and prepares us to meet our customers' needs when the markets do recover."

Flexibility is the key to success in such an economy, Kaiser says. "Those companies that are able to shift fire and pursue these opportunities are finding some success," he says. "Key remains to stay engaged and to hunt - as there is some work to be had - just harder to find and when found does require changes in the more traditional approach."

The global economic recovery will continue, although at its current uneven pace, says Charles E. Bunch, chairman and chief executive officer of PPG Industries in Pittsburgh. "The resumption of automotive OEM production and our position in high-growth businesses and regions, such as aerospace and Asia/Pacific, will supplement PPG's growth in the remainder of the year."

Public Policy Optimism
Public policy initiative
Most Optimistic
Least Optimistic
Job creation
46%
25%
Deficit reduction
43%
21%
Reduction in effective corporate tax rate
12%
54%
Source: Grant Thornton

The "uneven pace" reflects the change in times and housing trends given the current economy and the challenges associated with obtaining a loan for a mortgage, Kaiser says. "The residential market has changed, with a shift to replacement and remodel," he says. "Some customers have been able to adapt, others are struggling. The growth in rental properties has also provided both opportunities and challenges."

Trends in light commercial have also provided opportunities, Kaiser says, "as we are seeing 'punched openings' become attractive, given the various improvements in glazing technology - primarily energy control and energy management using low-E coatings.

At PPG, the management intends to secure additional pricing in businesses where it has been unable to fully offset inflation despite aggressive cost management and further pricing actions this past quarter, Bunch adds. "These factors are expected to be coupled with continued positive price trends in the Commodity Chemicals segment," he says.

According to the survey, only 13 percent of manufacturing leaders believe the U.S. economy will improve in the next six months, down significantly from 40 percent in May. At the same time, 40 percent believe the U.S. economy will get worse, up from 26 percent. In addition, only 21 percent of manufacturers say they will increase hiring and 35 percent say they plan layoffs.

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