"Large U.S. industrial manufacturers are optimistic about the opportunities they see in our growing economy," says Jorge Milo, director of PricewaterhouseCoopers' U.S. industrial manufacturing practice. "However, they have also become more sensitive to a number of factors that individually, or in combination could shunt their company's performance."

According to PricewaterhouseCoopers' Manufacturing Barometer study, 82 percent of manufacturers say they are optimistic about the economy's prospects over the next 12 months, compared to 78 percent from all industries. Sixty-six percent said they are optimistic about the world economy's prospects in 2005, compared to 63 percent across all industries.

Nevertheless, industrial manufacturers report a slight drop in average operating capacity in the fourth quarter, from 82 percent to 80.9 percent. In addition, 42 percent of industrial manufacturing executives see foreign competition as a potential roadblock to growth; 36 percent say oil and energy prices could thwart their growth plans; 32 percent are concerned about the relative value of the dollar; and 30 percent see shrinking margins as a potential barrier.

With these concerns in mind, industrial manufacturers have turned more cautious in their plans for the upcoming year. They are projecting average revenue growth of 7.8 percent for the next 12 months-a retreat from their 9 percent estimate in the prior quarter and well below the all-industries target of 9.6 percent.

In addition, only 45 percent expect to make major new investments of capital over the next 12 months, off from 56 percent last quarter-and below the cross-industry benchmark of 50 percent. These investments are expected to average 7.9 percent of revenues, also lower than the consensus level of 9.3 percent.

Although the number of industrial manufacturers expecting net hiring rose sharply to 53 percent, this remains below the consensus view of 57 percent. Industrial manufacturers expect to increase their current workforce by an average of 0.8 percent over the next 12 months, off from a high of 1.7 percent estimated in the prior quarter, and well below the increase of 2.4 percent expected by their cross-industry colleagues.

"Industrial manufacturers are taking a more conservative view of the future, including reductions in projected revenue growth, plans for new investments and hiring," Milo says. "Adjustments appear to be tied to heightened concerns about one or more of the growth inhibitors of relevance to this industry sector."

For more information on PricewaterhouseCoopers' Manufacturing Barometer survey, call 636-405-1672 or visit www.barometersurveys.com.