Patrick W. McGibbon VIEWPOINTS INDUSTRY LEADER OPINION & ANALYSIS Manufacturing Growing, but not Fast Enough v A
growing manufacturing sector is good news for most, but in our industry manufacturing growth must be accelerat- ing to create an expanding manufacturing technology
market. The growth rate in manufacturing led to double-digit de- clines in manufacturing technology orders in 2015, and is likely to yield the same in 2016. Current trends paint a bleak picture in the near term as plant closures pepper the headlines, key indica- tors remain mixed and risk assessments worsen. A deeper look provides hope for the future and a turn-
around in 2017. The US Manufacturing Technology Order program (USMTO) produced by AMT provides an excellent barometer on the health of the manufacturing sector as it is a leading indicator for downturns and a lagging indicator for upturns in manufacturing. The trend in USMTO suggests that manufacturing’s growth is about to plateau and may linger there for fi ve to eight months. After that point, experts expect signifi cant growth in manufacturing and a pick up in manufacturing technology or- ders. Domestic increases in wage and employment levels—as well as expanding profi tability of manufacturers—bode well for increased demand for manufactured goods. Declining invento- ries and more competitive pricing for domestic manufacturers suggest production rates will expand at a much faster pace by the second quarter of 2017. Unfortunately, the impact of these trends will not be evenly
spread. The outlook for the South Central USMTO regions remains bleak as most sectors report orders are fl at to slightly down. The oil & gas industry is fl at but so low that it is diffi cult to imagine business worsening. Bright spots are in the electronics and high-tech businesses. Automotive and consumer electronics are improving, and high tech manufacturers centered on Kansas City and Austin are looking for continued improvement. The North Central West region has similar issues as three of its top industries—agricultural, oil & gas, and mining—remain in their slumps. Medical equipment production stalled in late 2015 but is again expanding based on newly announced projects. The West region continues to struggle as refi nery, medical equipment and consumer electronics industries’ production rates remain fl at and below historical averages. Although prospects in aerospace
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have dampened as defense programs stagnate due to budget processes, change is expected after the recent declaration by the US Air Force that the F-35 is combat-ready, meaning pro- duction lines should ramp up soon. The North Central East region continues to be the largest
production area for manufactured durables but also continues to lose ground as the leader. This seems at odds with the dozens of local investments announced in the past quarter, amount- ing to nearly $1.5 billion. Automotive OEMs and their suppliers represented a majority of the investment. The newly announced investments in the steel mills and fabricated metal product sectors were encouraging when combined with the increase in capacity utilization seen by existing facilities.
Current trends paint a bleak picture in the near term. A deeper look provides hope for the future and a turnaround in 2017.
The North East has seen rapid improvements in business
recently as inventories have fallen and key customers such as aerospace engines, consumer electronics and fi rearms produc- tion levels have risen in the region. Manufacturing technology providers in the region are cautiously optimistic about a good be- ginning to 2017. As noted in March, the Southeast region contin- ues to outshine other regions. Most of the growth can be directly attributed to new capital investments in almost every sector— even energy—though it was driven by investment in nuclear and renewable energy development. Still the second smallest region by manufacturing technology sales volume in the country, the Southeast recorded the second largest new investment and job levels in the country with nearly a billion dollars in new capital investment creating more than 3000 jobs. The manufacturing sector isn’t growing fast enough and the news doesn’t point to an imminent improvement in the situation. Still, in an environ- ment where consumers and manufacturers are expected to have more money to spend in 2017, and where recent investment announcements have totaled over $5 billion, you have to have a sense that 2017 will be signifi cantly better than 2016.
Vice President, Strategic Analytics AMT - The Association for Manufacturing Technology
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