U.S. manufacturing executives predict uptick in activity in coming months

June 29, 2012

As the U.S. economy continues to ebb and flow, market experts have been hesitant to make predictions about any future performance for specific sectors. However, manufacturing executives are predicting an uptick in activity in the coming months, Reuters reported.

According to the news outlet, these executives are hoping that more industrial companies will look for deals to drive growth at a time when expansion in major economies is stagnating and people in power are taking a cautious approach to buying.

Many companies are looking to tighten their operations and eliminate as much waste as possible in order to save money. The adoption of lean manufacturing practices helps many firms improve efficiency, raise revenues and enhance the role of each employee.

This push for more efficient practices could increase, as concerns about Europe and the global economy have dulled the interest in big mergers. This has led U.S. industrial conglomerates to look for smaller acquisitions, according to Reuters. These firms have been influenced by large cash stockpiles, low borrowing costs and relatively low valued stock market numbers.

A number of other factors may lead to increased amounts of activity, according to the news outlet, including a potential rise in capital gains taxes in 2013 could expedite the nature of many deals.

"The appetite remains very, very high," Honeywell International Inc. chief financial officer Dave Anderson told an investor conference this month. Other market experts noted that many of the manufacturing operations have increased in value over the past year, again enticing larger firms to pull the trigger on a deal.

"Generally, on the industrial side, we've seen valuations improve a fair amount versus a year ago," Dan Comas, chief financial officer for Danaher, told Reuters. "A year ago we thought they were particularly expensive where I think people had a view that we're in for a 10-year recovery, and that has gotten calibrated a little bit differently today."

Companies may begin to look to these potential mergers and acquisitions as a hedge against the potentially slowing economy, as The Associated Press reported that spending and wages remained flat for the month of May.

According to the news outlet, consumer spending drives roughly 70 percent of economic activity in the U.S., and the lack of an increase in this metric shows that further declines could occur across all sectors.