Manufacturing Economy Enters an Expansion Cycle

Nearly every day, Fabricating & Metalworking receives news announcements that U.S. metalworking industry suppliers, as well as fabricators and machine shops, are expanding their operations and/or adding employees to their rosters. The U.S. manufacturing sector has indeed entered a growth phase, which is expected to continue thanks to a number of factors, including the implementation of automation, digital technology and AI to support increases in productivity, which play an essential role in the economic outlook.

In its first report regarding AI in manufacturing, the National Association of Manufacturers (NAM) found that AI is used throughout the shop floor, with R&D and more. In fact, manufacturers are leading the way in the use and development of new AI technologies, according to the report.

In a May podcast, The Conference Board’s Dana Peterson stated the positive key to the economic outlook centers on the productivity story. She said the no. 1 method companies are exploring to grow their businesses and maximize revenues during the next five years is to invest in digital technology, AI and automation.

Other factors supporting growth include reshoring/nearshoring of operations to mitigate supply chain risks, government spending in infrastructure improvements, and increases in customer demand. Additionally, research and investment into advances in additive manufacturing and producing sustainable products, as examples, improve quality, cut costs and drive overall equipment efficiencies.

To be sure, there are challenges and unknowns to the manufacturing economy such as price fluctuations for raw materials, major ongoing workforce challenges, and the upcoming U.S. presidential election. However, the numbers don’t lie, and several industry associations and economic groups are getting behind a positive forecast for the remainder of the year.

The manufacturing sector is entering an expansion cycle, which typically last 28-to-36 months, noted the Institute for Supply Management’s (ISM) Tim Fiore when discussing the organization’s semiannual forecast results in a webinar presentation. He noted slow growth leads to a longer expansion and growth cycle.

Of note were the economic outlooks reported by respondents for the remainder of the year: 44% of respondents said that revenues for 2024 will increase; 14% said revenues will decrease; and 42% indicated no change.

Is Your Shop Prepared for an Expansion Cycle?

These numbers are similar to the quarterly Manufacturers’ Outlook Survey for Q1 2024, issued by NAM: 68.7% of respondents felt either somewhat or very positive about their company’s outlook, edging up from 66.2% in Q4 2023.

The manufacturing sector is positioning itself for long-term growth, Fiore pointed out. The ISM’s Manufacturing PMI for April was down 1.1 percentage points from March; however, demand remains in the early stages of recovery, with continued signals of improving conditions. Output remains positive and inputs remain accommodative.

In other business indicators, AMT-the Association for Manufacturing Technology, reported that manufacturing technology orders increased 25% from February to March. What’s more, orders from contract machine shops increased to their highest levels in the last year.

Manufacturing industry leaders, as evidenced by the actions, investments and responses of manufacturers to general economic activity, are warming up to the remainder of the year’s forecast more and more. The industry is entering an expansion cycle. Ensuring your shop is ready for this growth will help as you capitalize on the opportunities.