U.S. paces global manufacturing in a partly sunny outlook

Global technology research leader IHS says, while global manufacturing growth shows no signs or retreating, the pace of growth may slow a bit as the pressures of low oil prices deliver a one-two punch.
By Bob Vavra, Content Manager, Plant Engineering May 14, 2015

The use of collaborative robots was one of the innovative areas discussed at Hannover Messe 2015 in Germany in April. Courtesy:Hannover MesseWhile global manufacturing growth shows no signs or retreating, the pace of growth may slow a bit as the pressures of low oil prices deliver a one-two punch.

That’s the view of global technology research leader IHS, which delivered its annual manufacturing market update to a room filled with industrial leaders and global trade press at Hannover Messe 2015.

Even while oil prices will affect both new wells and some automation product purchases, the overall outlook for the U.S. manufacturing economy remains bright, according to IHS analysts.

“The overall economic situation is improving,” said Alex Chausovsky, senior principal analyst for industrial automation with IHS. “We’re seeing some of that pent-up demand resulting in new orders.”

He sees overall growth for the U.S. at between 4% and 5% in 2015, but what he called “headwinds” may slow that growth a bit. “Oil and gas could have a significant impact,” Chausovsky said. “We see a decline in investments in automation equipment of about 8%, and oil and gas is approximately 7% of overall industrial automation equipment sales.”

But Chausovsky added, “The growth in the discrete sector will offset losses in the process sector.”

IHS analysts said overall oil sector growth will slow because certain types of drilling and extraction operations—shale oil for example—cost more than the price of oil, which makes extraction unprofitable. In many countries, such as Venezuela, the overall cost of extraction is prohibitively high, and barely was profitable when oil was $50 a barrel.

Spencer Welch, director of downstream consulting for IHS, said that the market will spend the next 18 month rebalancing production and supply before prices begin to rise significantly. “There are a number of wells just sitting out there waiting for the taps to bet turned back on,” he said. He noted that prices remain low despite a continuing rise in global demand for oil.

“North America already is starting to cut back production. Expensive projects will be at risk,” Welch said, but added. “We’re talking about a delay in projects, not cancellation.”

Bullish on U.S. market, part 2: In his annual meeting with the international press, Dr. Andreas Gruchow, member of managing board of Deutsche Messe responsible for international shows (and the host of the global press at Hannover Messe) said the importance of the United States as a global trading partner for Europe in general and Germany in particular is a vital one. It is one of the main reasons Hannover Messe officials are so excited that the U.S. will be the Partner Country at Hannover Messe 2016.

Gruchow noted that not only is the manufacturing the single leading economic driver in the U.S., it is also on its own the world’s ninth largest economy. He said besides the 12 million U.S. manufacturing jobs, the manufacturing sector also supports 1 million German jobs.

On the subject of Industry 4.0 and the Industrial Internet of Things (IIoT), Gruchow said the Integrated Industry topic at the center of Hannover Messe 2015 reflects the needs and expectation of exhibitors. “Everything is moving from a cost center to a profit center,” Gruchow said. Projections in Germany are that IIoT deployment in Germany next year will increase efficiency by 18% and reduce costs by 14%. “We are making a big leap forward,” said Gruchow.

 A tiff over TTIP? Wisconsin Gov. Scott Walker visited Hannover Messe during a European trade mission for his state and spoke in support of the Transatlantic Trade Investment Partnership (TTIP). The goal of the proposed agreement would be to reduce trade and tariff barriers between the United States and the European Union, and it’s patterned roughly along the same lines as the once-controversial North American Free Trade Agreement (NAFTA).

The difference now is that the controversy is not as great on the U.S. side. In fact, it might be the only significant issue that finds President Obama and Congressional Republicans on precisely the same page.

President Obama launched the negotiations in 2013, and while Walker called TTIP “the biggest bilateral relationship in history,” when the addressed a forum at Hannover. Even as the trade deal is being painstakingly negotiated, there are some factions in the EU that are less than thrilled by the prospect.

One speaker at a U.S.-German business partnership forum conceded “there is a lot of skepticism” over the prospects of TTIP. “From my perspective, that skepticism is not unjustified,” he said. “There is a need to find out what is negotiated about it. There is a lot of secrecy, and this will lead to skepticism.”

Our pal, the robot: There were many fascinating presentations and discussions at Hannover Messe 2015, and number one on the list were the Industry 4.0/IIoT topic that pervades every corner of the fairgrounds. Another topic that may emerge even more quickly is the evolving relationship between humans and robots.

In the past, robots were programmed and kept at a distance from humans. Emerging technology is allowing humans to teach robots by showing them movements needed to complete a task and have the robot remember those movements.

While this won’t happen for most applications, or even many of them, the difference between programming a robot and teaching it is a fundamental change in the barriers between the two workers.

Incidentally the barriers are coming down as well. The robots used in some smaller-speed applications will interact more directly with humans in the near future, and will have sensors that will stop a robot’s motion when the human gets too close.

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