"BRIC manufacturing sector confidence appears to have swiftly returned to strength following the slump in confidence that ensued from last year's global financial crisis," observes Ian Gomes, chairman of KPMG's High Growth Markets Practice. "Robust growth is widely forecast based on expectations of improving domestic demand, the success of government stimulus measures and signs of stabilisation in the world economy."
The improved picture should come as good news to investors who own or are looking to buy industrial property in the BRIC nations. According to the report, the current reading nearly matches the +47% posted last summer, suggesting that output levels will rise at a marked pace over the next 12 months. KPMG says confidence is highest in Brazil, though firms in Russia and China also predict robust rates of expansion. Firms in India are much less upbeat than those in the other three countries, but confidence has still shown a clear improvement from January.
The report says BRIC manufacturers are particularly encouraged by sales growth prospects for coming year. A net of +44.8 firms predict higher levels of new orders in coming months compared to only +4.9 making similar predictions in January. KPMG researchers say this means business revenues are set to increase sharply. They add that expectations for company profits are the highest since the survey began in January '08.
Despite the positive changes, Gomes warns there may be bumps in the road to recovery. "Faster growth is likely to be accompanied by a pick-up in inflationary pressures as demand for raw materials hardens and manufacturers recover some degree of pricing power," he explains. "However, rates of inflation are forecast to be moderate in comparison with the elevated levels seen in 2008."
In regard to individual countries, the report finds the outlook for Brazil's manufacturing economy over the coming year is decidedly brighter, with a sharp increase in confidence regarding both business and new orders. Over 68% of Brazilian manufacturers believe that they will receive more new work during the next twelve months, compared with only 2% expecting a decline.
The outlook in Russia and China is somewhat less optimistic but still strong compared to earlier in the year. The net balance of Russian manufacturers anticipating higher levels of business activity by this time next year rose to +49.7 in July from +21.6 in January, while the new orders net balance of +47.0 is up from the net balance of companies expecting a rise in new orders is up from +19.5 in January. In China, a headline net balance for activity of +46.7 indicates manufacturers are highly confident about the immediate future. The figure, which is up from +2.6 at the start of the year, is the highest since January '08.
Indian manufacturers are also more optimistic, largely as a result of firmer demand and improved economic prospects, but they are decidedly less confident than manufacturers in the other three countries. In addition, confidence remains substantially below '08 levels, with a net balance of +22.5 firms expecting more activity and +18.8 anticipating growth in new orders. On the other hand, these figures are up, respectively, from -1.6 and +3.6 in January.
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