The manufacturing industry took a few hits in 2019, from tariffs and trade regulations, to strikes and supply chain disruptions. Nonetheless, the industry itself is still going strong across several areas. What does 2020 hold?
Manufacturers had to brace for potential disaster through much of 2019, largely due to fears of interrupted supply chains and decreased global demand. Restricted trade with Mexico left many businesses—particularly in the automotive industry—wondering where to source many crucial parts without suffering long delays and increased costs. This isn't the only thing that left car manufacturers scrambling, either. General Motors' workers went on strike, before returning to work and boosting automobile production around November.
Things are less positive for the aerospace industry, however. Boeing is suspending production of its 737 Max airliner after two fatal crashes and heavy criticism that it downplayed safety risks, an action which could have a negative impact on supply lines.
China's manufacturing slowed following the trade war with the U.S., only to begin showing signs of growth in late November. Unfortunately, the tariffs intended to hurt China also negatively impacted the U.S., with September showing as the worst manufacturing month in the past ten years.
Currently, experts predict that the recent economic upswing will continue through 2020, even amid fears that the U.S. may be heading into a recession by the end of 2021. The housing market is showing growth, with the construction of single-family homes reaching a 10-month high, and multi-family builds increasing for the second month in a row. Fannie Mae predicts that the U.S. economy will grow by 1.9% in 2020, carried by consumer spending and increased activity in the housing market—provided the U.S. and China can reach a trade agreement.
Despite trade wars slowing manufacturing, increased activity in the third quarter of 2019 offers a hopeful sign that the downturn is coming to an end. While the sector is still at risk from trade restrictions if China and the U.S. fail to strike a deal, the low unemployment rate, job growth, and increased activity in the housing sector point to strong consumer activity that may be able to spur production and investment across several industries. Still, some experts are skeptical—the decline in industrial production may be a sign that the picture isn't as rosy as it seems. The growth created by an uptick in consumer spending may not hold out across all of 2020.
The automotive industry has historically received a lot of government support as a major revenue generator. Coupled with the increase in consumer spending, experts predict that automotive sales will continue to trend upward in 2020. Manufacturers of passenger cars, light vehicles, and low-price vehicles, in particular, will likely need to increase production if these predictions hold true.
The aerospace industry is also likely to benefit from the projected turnaround in 2020. Analysts at Deloitte point out that the industry experienced a decline in deliveries in 2019, citing production problems in certain aircraft models (like the ill-fated 737 Max airliner mentioned above) and changing trade agreements as major contributors. That said, they expect aerospace to return to an upward trajectory next year, predominantly in military and space technologies. Increasing global threats have lead to a subsequent increase in military defense spending, and private investors are expected to invest steadily in existing and emerging commercial space projects both within the U.S. and worldwide.
Many of the optimistic projections for 2020 operate under the assumption that the U.S. and China will be able to strike some kind of trade deal. This is probably unsurprising, if only due to the overall agreement among experts that changing trade regulations and supply chain disruptions were major contributors to the decline in 2019.
Even without having a specific trade deal in mind, it's very likely that striking any kind of trade agreement will be good news for the manufacturing industry—it's very difficult to allocate investments, source supplies, and adjust production schedules in the face of uncertainty. One need only look at Boeing's response to Brexit as an example, as they've redistributed inventory to limit the potential difficulties in moving parts from mainland Europe to the U.K., or auto companies like GM scrambling to find alternate sources for parts in response to tariffs on Mexican goods. For the manufacturing sector to experience steady growth, international trade agreements need to offer them some sense of stability.
2019 was a rough year, but multiple sectors are likely to show improvement in 2020. As long as the U.S. can strike some kind of trade agreement with its trade partners and preserve the stability of supply chains, experts project that manufacturers will enjoy significant growth.
