Manufacturing output strong in 2021
Interact Analysis reported an 8.3% growth for the manufacturing industry in 2021, which is a rebound from 2020.
Interact Analysis research shows the pandemic has had marked effects on the manufacturing industry. While many machinery sectors are enjoying double-digit growth, other areas continue to suffer due to supply chain issues and chip shortages. Output growth of 8.3% in 2021 has been recorded as manufacturing recovers from the pandemic. And while this is dwarfed by the 16% manufacturing output growth seen in 2010 after the financial crash, it is not so unexpected. That’s because the last crash saw manufacturing shrink by 8.3% in 2009. In contrast, 2021 saw decline of only 3.2%.
The picture in the machinery sector is more volatile for two reasons. First, the machinery market is 1/20th the size of the overall manufacturing market, so small changes in production value have a big impact. Second, machinery investment is both niche and capital intensive. Some sectors, such as agricultural, semiconductor & electronics, and textile machinery are performing strongly. Other sectors, such as aerospace, are having a much harder time.
From a regional perspective, Europe was by far the worst affected by the pandemic, with a 2020 manufacturing slump of 7.9% and a 12% slump in machinery growth. Conversely, the USA performed much better due to a lack of federal lockdowns and a large stimulus. In 2022, the Americas (of which the US accounts for 72% of manufacturing output) will see manufacturing growth of 4.6%.
Asia, excluding India, has handled the pandemic best from a manufacturing perspective. In 2022, manufacturing growth of 7% and machinery growth of 6.5% growth are projected. In fact, in a way, these numbers are understated because China contributes to 69% of production within the region and did not shrink in 2020. If China was removed, then the growth for the rest of the region would be 9.6% and 11.5% in manufacturing and machinery, respectively.
A combination of supply chain disruption and the shipping crisis has caused chaos for manufacturing. The just-in-time model has struggled to cope with the problems in many cases, while container prices are at 8- to 9 times the pre-pandemic cost in popular shipping routes.
Adrian Lloyd, CEO at Interact Analysis, said, “Although we are likely to see a stabilization of growth for many sectors in 2022, this does not necessarily indicate a slowdown. A renewed production downturn is expected in 2023/24 and the boom-bust semiconductor crisis is likely to have a major impact on this. We also cannot ignore the role that the Russian invasion of Ukraine is likely to have on the market. Being the largest natural gas producer globally, its effect on the worldwide manufacturing economy is likely to be colossal and we’ll have more on this in the next quarterly update of our manufacturing industry output tracker.
“Finally, a word on reshoring. This is a much-discussed trend and has been touted as a possible solution to supply chain problems. It is not. Beyond certain strategic sectors such as semiconductors, the case for reshoring is weak and, usually, makes no economic sense. This will continue to be the case. We may see some manufacturing shift from China to another hub location, such as Southeast Asia or India. But we are unlikely to see the large-scale return of manufacturing to Europe or the United States.”
– Edited by Chris Vavra, web content manager, Control Engineering, CFE Media and Technology, firstname.lastname@example.org.
Original content can be found at Control Engineering.
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