Optimism regarding the direction of the domestic economy remained positive among U.S. industrial manufacturers during the second quarter of 2014, according to the Q2/14 Manufacturing Barometer, released by PwC US. In addition to the positive sentiment, PwC’s report showed a rise in capital spending plans among industrial manufacturers as they focus on utilizing their cash positions to strengthen their products, add personnel and secure technology in a highly competitive market.

Optimism regarding the prospects of the U.S. economy during the next 12 months dropped among U.S. industrial manufacturers to 65% during the second quarter of 2014, compared to 71% in the first quarter. However, sentiment rose slightly from 63% in the second quarter of 2013 and none of the respondents were pessimistic regarding the domestic outlook. Of the U.S. industrial manufacturers polled, optimism about the world economy was at 38% during the second quarter of 2014, down slightly from 42% in the first quarter, but up from 31% a year ago. Still, uncertainty regarding the global economic outlook remains high, with 57% of respondents indicating uncertainty compared to 50% in the first quarter.

“We saw a notable increase in indications for both long-term capital investment and short-term spending plans during the second quarter,” said Bobby Bono, PwC’s U.S. industrial manufacturing leader. “Companies have maintained historically high levels of liquidity and are increasingly looking to put this money to work in strengthening their operations, adding talent and improving technology in a highly competitive marketplace. Plans for R&D spending reached the highest level in the past five quarters, as management teams look to differentiate their products and enhance the value proposition they offer to their customers. This comes against a backdrop of sustained optimism regarding the domestic economy, coupled with a continued high level of uncertainty regarding the direction of global commerce.”

The Q2 Manufacturing Barometer also indicated a notable rise in plans for M&A spending. Thirty eight percent of respondents planned M&A activity in the year ahead, compared to 28% in the first quarter and 23% in the second quarter of 2013. The majority of that group is focused on purchasing another business, followed by the sale of part/all of their own business or a spin-off.

“The intense competitive environment combined with strong balance sheets at many companies is leading to an increased interest in M&A among industrial manufacturers. Companies are doubling down on what they do best, and are primarily looking to tap their cash to further strengthen their core product offerings, rather than entering new markets or expanding abroad,” Bono continued.

To read the entire PwC news release, click here.