July 2012 - The economy continues its uncertain trend into the summer months, following a first quarter that held a fair amount of pent-up optimism.
A selection of numbers from the United States illustrates the delicate balance between improvement and decline. In May, home sales fell 1.5 percent compared to April numbers, although they’re up 9.6 percent from one year ago, according to the National Association of Realtors. The Conference Board’s index of leading economic indicators increased to 95.8 in May, its highest level since June 2008. However, the Fed expects sluggish growth of just 1.9 percent to 2.4 percent this year.
For manufacturing, the Institute for Supply Management reported economic activity expanded in May for the 34th consecutive month, with a PMI of 53.5 percent. Of the 18 manufacturing industries surveyed in the report, 13 reported growth in May. A respondent from the machinery sector commented, “Sales were stronger than expected; customers are waiting until the last minute to place orders.” One respondent from the fabricated metal products sector noted, “We are having the best year in sales volume and profit since mid-2008.”
The era of belt-tightening and penny-pinching is far from over, but as business shows signs of a pickup, companies are responding with plans to increase staff to accommodate a bigger workload.
In the United States, Milwaukee-based ManpowerGroup’s latest employment outlook survey reported a positive outlook for employment, with 92 percent of surveyed companies expecting similar or growing staff levels.
According to ManpowerGroup, “The continued climb in confidence marks 11 straight quarters of positive overall hiring outlook, which were preceded by three quarters of pessimistic employment plans.”
An alternative strategy to cope with a growing workload is outsourcing certain business processes. According to a survey focused on outsourcing and insourcing released in June by Deloitte Consulting LLP, 60 percent of companies now see outsourcing as a standard part of their businesses and another 19 percent are considering it.
As more companies consider outsourcing, Deloitte points out it’s important to distinguish outsourcing from offshoring, tighten agreements regarding scope and cost of work and consider insourcing some functions.
“This survey reiterates what we see often in the industry—some companies continue to confuse outsoucing with offshoring,” said Marc Mancher, principal of outsourcing advisory services for Deloitte Consulting LLP, in a press release. “Many still view the two business decisions as inseparable, even though many times outsourced work does not leave the originating country. The outsourcing decision relates to a function being performed by non-employees (oftentimes domestic) while the offshoring decision relates to moving the work to a distant location, in many cases for labor arbitrage considerations.”
The global economic landscape is changing constantly, and surveys like the one from Deloitte show companies are adapting to a new environment. In the next decade and beyond, businesses will need to remain flexible. Recent analysis from PwC comparing shares of world GDP for key global country groupings in 1992, 2012 and 2032 projects emerging and developing economies could account for 63 percent of world GDP by 2032, driven primarily by China, India and other developing economies. For more on the changing role of developed and emerging global markets, turn to page 22 and read this month’s global economic report. MM
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