Rising Raw Material and Energy Costs are Raising Concerns Among North American Industrial...

Rising Raw Material and Energy Costs are Raising Concerns Among North American
Industrial Manufacturers in 2nd half of 2008
Manufacturers' Buying Group Releases Results of 2008 H2 Group Outlook Survey

CHICAGO, July 22 /PRNewswire/ -- Prime Advantage, the leading buying
consortium for midsized industrial manufacturers, announced the findings of
its second Group Outlook Survey, revealing the top economic concerns for the
second half (H2) of 2008. Raw material and energy costs continue to top the
list of cost pressure concerns, but this time they have become an overwhelming
worry among North American manufacturers.
The results of the first survey, released in January, revealed that the
group's manufacturing members were apprehensive of rising material
(43 percent) and energy (17.5 percent) costs. This latest study reveals that
93 percent agree that material costs will be an economic concern for the rest
of 2008, with a 67 percent agreement on energy costs following closely behind.
Survey data was collected from 72 senior-level representatives of
industrial manufacturing companies, including business owners, vice presidents
of procurement and purchasing directors.
"The Prime Advantage Group Outlook Survey has served as a reliable
indicator by identifying key economic factors of influence for mid-sized
manufacturers throughout North America," said Louise O'Sullivan, president and
founder of Prime Advantage. "The survey has shown that Prime Advantage
members' perceived concerns in January were on the mark."
The H2 Group Outlook Survey follows as an update to the first survey
conducted in January '08 when members were asked to predict their expected
cost pressures for 2008.
Top Expected Cost Pressures for H2 2008
In addition to seeing an overwhelming 93 percent of respondents agree that
raw materials (including stainless steel, nickel, copper and other metals and
plastics) were a major concern for H2 2008, two-thirds of all manufacturers
(up 49.5 percentage points from the first survey) agree that energy costs will
be a major concern for the rest of the year.
"Other indicators, such as the Institute for Supply Management's June 2008
Manufacturing ISM Report On Business(R) reflect that rising commodity prices,
combined with a fluctuating Purchasing Managers Index, are putting great
pressure on U.S. manufacturers," said O'Sullivan. "The bottom line is that
pricing pressures for raw materials and commodities will likely continue to be
an obstacle to success for many North American manufacturers."
Unlike the first Group Outlook Survey, inflation is now the third highest
concern, with 39 percent in agreement (up 31 percentage points from January).
Logistics and supply chain costs followed closely at 38 percent -- 21.6
percentage points higher than the first Group Outlook Survey. Healthcare (18
percent), foreign competition (12 percent), overhead (11 percent), and labor
(8 percent) were among the other cost pressure concerns identified by survey
respondents.
(Photo: http://www.newscom.com/cgi-bin/prnh/20080722/AQTU028)
Other Expected Cost Pressures in H1 '08 vs. H2 '08
Healthcare (18 percent), foreign competition (12 percent), overhead (11
percent), and labor (8 percent) were among the other concerns that received
greater attention in the latest survey. In the H1 survey, healthcare was cited
by just 1.7 percent of respondents, overhead was cited by just 2.8 percent of
respondents, foreign competition was cited by just 3.4 percent of respondents,
and labor was cited by four percent of respondents.
In addition, 51 percent of respondents have shifted the top sourcing
priority to "Identifying Reliable and Cost Efficient Sources for Raw
Materials" rather than "Improving Efficiency Measurements".
Contrary to the first Group Outlook Survey, a higher percentage of
respondents now expect capital spending to decrease or stay the same as the
first half of 2008. Thirty-nine percent of Prime Advantage members expect
capital spending to decrease in the next six months and 42 percent expect
capital spending to remain unchanged. Previously, Prime Advantage members
predicted no change from 2007 (52 percent) or an increase (36 percent) from
2007 in capital spending.
Optimism Remains
The Prime Advantage Group Outlook Survey also showed confidence for
employment opportunities in the second half of 2008. While only 17 percent
expect job cuts within the next six months, another 17 percent expect job
growth and 66 percent expect to make no changes and keep their current
employee base at the same level.
"These results show that U.S. manufacturers are cautiously optimistic
about the rest of the year, in spite of current economic concerns," O'Sullivan
said. "Through the collective buying power available from Prime Advantage, our
members are still hopeful."
Since its inception, Prime Advantage has returned more than $60 million in
rebates and discounts to its members. These real savings are helping U.S.
manufacturers gain a powerful competitive advantage in the face of out of
control commodity costs.
About Prime Advantage
Founded in 1997, Prime Advantage is a buying consortium for industrial
manufacturers with more than 500 members and more than 110 endorsed suppliers.
For more information on Prime Advantage, visit the website at
http://www.primeadvantage.com.
SOURCE Prime Advantage

Mike McDonald of Prime Advantage, +1-312-601-3110,
mmcdonald@primeadvantage.com; or Peter Wiltjer of BWMG, Inc., +1-630-701-3363,
pwiltjer@bradleywiltjer.com, for Prime Advantage