Forbes examined the manufacturing forecast for 2016 to 2017, and the numbers do not look as rosy compared to the growth in 2015. America's weak manufacturing industry dampened the previous enthusiasm because of a strong dollar, the decline in oil production due to low oil prices and less spending on capital projects. Various statistics point to stagnation through the end of 2017 for manufacturing.
Behind the Numbers
The manufacturing forecast looks at several key data sets that show how the industry is performing. Production increased dramatically from 2012 to 2015, but then it leveled off into a plateau from 2015 into 2016. After the global economy sufficiently recovered from the financial crisis that started in 2007, growth has become less pronounced.
Exports dropped sharply. They peaked at around $137 billion at the beginning of 2015, but then dropped to $115 billion by early 2016. Meanwhile, the foreign exchange value of the dollar has climbed steadily since 2014, which means it costs more to purchase American-made goods in foreign countries. The number of oil rigs in use in the United States dropped from a high of of nearly 2,000 at the start of 2015 to around 500 by early 2016. Oil companies need pipe manufacturers and machinery to run these rigs, so the oil industry relies heavily on manufacturers to keep production going.
Companies Affected the Most
The manufacturing forecast predicts which types of companies in various manufacturing sectors stand to lose the most because of poor export markets and low oil prices. Aircraft manufacturers, producers of machinery, and makers of computers, appliances and electronics all rely heavily on sending goods to foreign countries. The price of the dollar versus other currencies affects aircraft manufacturers less because orders usually take five to nine years to complete. Smaller electronics and commodities, on the other hand, may face stiff competition in foreign markets from lower-priced alternatives.
Fewer Orders
Even though consumers are spending more money on goods, companies have scaled back spending. This particular manufacturing forecast points to less spending on computer upgrades, hiring more workers and increasing production. As orders for goods leveled off, so did capital spending to improve manufacturing processes.
Employment
The labor pool for manufacturing also expects to decline, at least until 2024. Part of that reason is due to increasing automation that replaces human workers, better adaptive technology that makes machines more efficient and additive manufacturing that produces customized, on-demand items. As manufacturers become more efficient, they save money on labor and maintenance costs. However, companies need to invest money to see these results.
Good News
The good news from this manufacturing forecast is that construction should pick up and consumers continue to spend more money thanks to a robust job market. It may take another two years for export markets and oil production to pick up again as the global economy starts to expand at a greater pace.
Any good manufacturing forecast analyzes the current business climate while trying to point to trends that businesses can use to make viable business strategies. As long as manufacturers stay the course and look for long-term growth, they should do just fine as they ride out the ups and downs of foreign influences.
Photo courtesy of Maryland GovPics at Flickr.com
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