Overview Te United States military is an important market for gun
and ammunition manufacturers. In 2014, IBISWorld estimates that the military is expected to account for 23.8% of total industry revenue. During the past five years, revenue from the military market segment has been decreasing. Te wars in Iraq and Afghanistan ushered in a substantial increase in the amount of military spending by the government, result- ing in additional purchases of the industry’s related products. However, since 2011 defense spending has declined because of the winding down of combat operations in the Middle East and budget cuts, thus wiping out earlier increases. Te passage of the Budgetary Control Act is expected to cut the defense budget by $454.0 billion between 2013 and 2021. In 2014, total federal funding for defense is expected to decrease by 4.5% resulting in lower military demand for guns and ammunition.
Consumer Spending Pivotal While budgetary cuts and a pullback from conflict zones
dramatically decreased gun and ammunition demand from the US military and local law enforcement agencies, strong consumer spending on firearms and ammunition kept in- dustry revenue expanding until 2014. Gun and ammunition sales to consumers are driven by a number of factors, yet the recent spike has been mainly attributable to fears regarding the possibility of tougher gun-control legislation from the Obama administration. Te situation has been exacerbated by recent mass shootings, such as the Sandy Hook Elemen- tary School shootings, which increased the visibility of gun control talks, making potential legislation a greater possibil- ity. In early 2013, the Obama administration announced its intention to reform gun laws to prevent a similar tragedy from happening again. Although no federal act on gun con- trol has been passed in Congress, President Obama has not abandoned his attempt. In late 2013, the Obama administra- tion unveiled a plan to address gun violence through the use of 23 executive actions and three presidential memoranda. Te looming possibility of tougher gun control pushed
consumers to purchase firearms and ammunition at record rates until 2014. Te number of FBI National Instant Crimi- nal Background Checks (NICS) is currently above its histori- cal levels, which is indicative of mounting consumer interest in gun ownership. According to the FBI’s NICS database, the number of prospective buyers for firearms increased sharply in the five years to 2014. During this period, the number of background checks is expected to increase at an aver- age annual rate of 7.3% to 20.0 million in 2014 from only 14.0 million in 2009. Because civilians constitute the largest market for guns and ammunition, the demand they gener- ate is critical to the industry’s success. However, beginning in January 2014, consumer spending on firearms began to decrease. Te number NICS background checks performed between January to June 2014 is 5.2% lower than those
30 Aerospace & Defense Manufacturing 2014
performed from January to June 2013, indicating that fears of stricter gun controls may have run their course as a strong revenue driver in the short term.
Trading Firearms and Bullets Exports generate about 33.3% of the Guns and Ammuni-
tion Manufacturing industry’s revenue. Although govern- ment demand for industry products is expected to subside in the five years to 2014 due to budget cuts, exports are anticipated to grow at an average annual rate of 3.8% during this period because of mounting global demand. Tis robust growth is forecasted to continue over the five years to 2019, allowing the United States to remain a net exporter of guns and ammunition. Tis anticipated growth will provide need- ed relief, which will counter receding government demand. Domestic consumers, on the other hand, have increas-
ingly turned to imports to satisfy their rapidly growing demand for guns and ammunition. With demand for in- dustry products surging during the past five years, domestic manufacturers have struggled to keep up. Consequently, during the five years to 2014, imports are expected to grow at an annualized rate of 3.8% to $3.6 billion. Te industry gets a large portion of its firearm imports from Austria and Italy, due to the popularity of the Glock and Beretta brands, respectively. However, Germany and the United Kingdom are the most popular sources of imports of ammunition and ordnance products.
Moderate Expansion Aſter record growth in civilian small arms and ammunition
sales during the past few years, demand is expected to moder- ate in the five years to 2019. As the economy continues to accelerate, fears regarding increased crime and concerns about changes to gun laws are anticipated to subside, causing this segment’s growth rate to slow to a more reasonable rate. Fur- ther, the sequestration effects will continue to put budgetary pressures on law enforcement agencies and the US military. As such, these markets will remain constrained and unlikely to provide strong demand for manufacturers. As a result, many gun and ammunition manufacturers—especially those that ca- ter to military suppliers will try to offset lower defense spend- ing in the United States with more exports to growth markets, such as Asia and the Middle East. Consequently, IBISWorld estimates that exports as a share of revenue will reach 35.2% in 2019 up from 33.3% in 2014.
Tanks and Armored Vehicle Manufacturers Federal and state governments account for 61.9% of
total revenue generated in the Tanks and Armored Vehicle Manufacturing industry. During the past decade, the wars in Afghanistan and Iraq supported strong demand for tanks and armored vehicles. According to the Department of
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