Read any two different trade magazines or newspapers or talk to any two people involved in industry and you will find that some believe we are headed for a US manufacturing slowdown, others will tell you we are poised for growth. For industry analysts, there is more at stake than just a reputation for being an optimist or pessimist. It’s a matter of reading the economic tea leaves correctly to better provide accurate and actionable advice.
So is industry in America headed for a slowdown or poised for growth? It depends on who you ask and what they are basing their opinions on.
Why Some Believe We are Headed for a Slowdown
Those who believe we are headed for a slowdown will point to the recent headlines of plant closings across the United States, including the high profile shuttering of five General Motors Plants. The GM closings impact some 4,000 workers and immediately affect the economies where they were located. Some however, believe GM will eventually close up to 7 plants in North America, potentially affecting 14,000 workers. But the GM closings are not isolated. Electrolux announced the closing of a plant in Memphis where its Frigidaire appliances are built. The shutdown is said to be related to the closing of Sears stores and accelerating steel costs.
Other manufacturers have announced closings of plants in Grand Rapids and Detroit, Michigan, Morrisville, North Carolina, Baton Rouge, Louisiana and in communities across the country from Delaware to California.
Industry analysts look deeper than just newspaper headlines, however, and will point to other factors to support their “slowdown” theories. They point to domestic and global financial volatility and trade-war uncertainty. They have concerns regarding softening economies in China and Europe. Some analysts will focus on recently reduced GDP projections for the coming year and the continuing political in-fighting and uncertainty here and abroad.
Are there reasons to be concerned? It is always wise to be cautious and manage prudently. No one wants to be viewed as “whistling through the graveyard.” On the other hand, there is value in optimism and in looking for positive indicators.
Why Some Believe We are Poised for Growth
What some fail to realize is that while it is easy to draw a line between plant closings and a slowing economy, there are many other major factors affecting the manufacturing sector. In the case of GM, for example, the company says it is closing plants to become more “agile” and “responsive” to changes in the market. Just a few years ago, for example, the Chevy Cruze was a superstar in the automaker’s line-up, mainly due to its appeal as an affordable, entry-level sedan. Since then, however, sedan sales have evaporated from previous levels, being replaced by more versatile, larger SUVs and crossovers. The young, entry-level car buyer market has also shrunk, as young people move into the cities and use public transportation, ride-sharing services, and short-term scooter and bike rentals. This is more the result of a seismic change in the market and not necessarily a reflection of an economic slowdown. The auto industry, in particular, is facing even more significant market forces like changes to alternative fuels and self-driving vehicles.
Beyond the auto industry, corporate investment in manufacturing appears to be strong. In March 2019, orders placed by U.S. factories for new business equipment rose to their highest in eight months. Orders for durable goods, those intended to last at least three years, rose to the highest level in seven months, up 2.7%. Orders even rebounded in March 2019 for Boeing, following their recent, well-publicized issues.
The indicators are more than short term feel-good stories. In April 2019, the Institute for Supply Management stated that manufacturing in the United States in March expanded for the 119th consecutive month. The Department of Labor reports that manufacturing-related jobs increased by 284,000 in 2018, the most since back in 1997.
After a volatile 2018, manufacturing appears to be on solid footing through 2019 and beyond. It may not be the head spinning-growth some may be looking for, but there are certainly reasons to be optimistic.
Looking Ahead Through 2019 for US Manufacturing
It appears most industry analysts are predicting growth of 2.0-3.0% in the sector. While that may seem conservative or even pessimistic compared to the 2.9% growth experienced in a volatile 2018, it is solid and could even be viewed as optimistic. Yes, the global economy may be softening, but we need to keep in mind manufacturing in the U.S. is also emerging and responding to significant changes in the marketplace. We are also working through massive technological changes including the IoT, blockchain technology, artificial intelligence and more. The longer the economy remains solid, the more time we have to thrive through these changes and position ourselves for the future.
At Wiley Metal, we are admitted cheerleaders for U.S. manufacturing. We are pleased to partner with not only nationally recognized manufacturers but those with world-wide reputations. We have gone through it all with many of them and recognize the value of these partnerships in both good and struggling economies. We are in a constant state of proactive improvement in our policies and techniques and are embracing emerging technologies as we recognize the value of each. We, ourselves, have grown from a “we’ve always done it that way” attitude to a “how can we do it better” philosophy. Sure, we may take a “glass half-full” point of view more often than we are negative, but don’t feel that makes us naive. It simply makes us believers in ourselves and the capabilities of our partner clients.