Global growth kindles heightened optimism from manufacturers
January 29, 2018Seize opportunities, strike while the fire is hot, experts urge
Economists worldwide seem to agree on one thing: Manufacturers, finally, have something to celebrate. The outlook is bright. A window of growth is opening, for those who are ready to jump on emerging opportunities. The positive signs can be found in many places, from productivity reports to projections for consumer spending, construction activity, and worldwide expansion of the middle class. Waves of digital transformation are changing up business models, fueling investment in technology, spurring innovation, and generating product designs with plenty of wow-factor.
But, every cycle has its ups and downs, every Economics 101 student knows. As manufacturers move into this up-phase, it is important to keep that concept in mind, generating a sense of urgency. The window of opportunity may not remain open for long.
Just how good is the good news?
Some manufacturers, still licking their wounds from the Great Recession, may be skeptical, asking, “Is this new positive vibe real, or smoke and mirrors?”
The answer is, “Believe it.” Data substantiates the claims, and respected analysts are blowing the horn. “The world economy is entering 2018 on a high note. Economic growth in the United States, the European Union, Japan, and China accelerated in 2017, and large emerging economies are regaining momentum. Global growth forecasts for 2018 are upward of 3.9 percent. Stock markets have reached record highs. Unemployment is down and wages are starting to rise,” says Brookings.
According to the BBC, UK manufacturing is enjoying growth, with manufacturing output at its highest level in 10 years. In fact, output is expanding at its fastest rate since early 2008 after recording a seventh consecutive month of growth in November.
Renewable energy projects, boats, airplanes and cars for export helped make the impressive 3.9% growth in late 2017, the article says. The author points to two factors: a weaker currency and global growth.
“Sterling's fall in value following the Brexit referendum has made UK exports more competitive,” says Kamal Ahmed, BBC economics editor.
He writes, “And for the first time since the financial crisis, the three main engines of global growth - the USA, China and Europe - are performing strongly at the same time. That has led to car exports, for example, rising rapidly - contributing to a narrowing of the trade deficit with the rest of the world.”
Lee Hopley, chief economist at manufacturers' organization EEF, says: "UK manufacturers were, in the main, in good shape as 2017 came to a close, with the majority of sub-sectors enjoying growth.”
"Manufacturers' expectations for the year ahead point to output and export growth being maintained through this year on the back of continuing support from a burgeoning global economy. This, together with an ongoing commitment from government to deliver on its industrial strategy, will be crucial in helping to propel the sector forward," she says.
Hopley recently participated in a webinar with Infor and IndustryWeek, presenting her predictions for the future. You can download a recording of the event here.
In the US
Bloomberg also reports positive news for US manufacturing, predicting surges in consumer demand. In fact, these demands could exceed current inventory levels, driving manufacturers to expand, or raise prices. Bloomberg predicts US manufacturers will need to boost inventory by $50 billion to keep up with demand. For the manufacturers who are eager to crank up production and invest in expansion, this increased demand is good news.
“U.S. manufacturing production just had its best year since 2011, yet some argue that 2017 was as good as it will get and that a slowdown is ahead. We think the opposite is more likely: Factory output is poised to speed up. Investors worried that the equity market is stretched should take heart. Stronger growth in factory output is a good reason to remain cyclically oriented… Stronger global growth expectations and a weaker dollar should help as manufacturing goods represent about half of all exports,” says Bloomberg View.
Now, the warning
Good things can’t last forever.
“But political leaders and policymakers must stay mindful that the present economic momentum reflects a confluence of factors that is unlikely to last for long. The global financial crisis may seem firmly behind us, but without prompt action to address structural growth impediments, enhance the inclusiveness of growth, and build policy buffers and resilience, the next downturn will come sooner and be harder to fight,” says Maurice Obstfeld in the International Money Fund blog.
After a decade of slow recovery, fragile financial markets, and uncertain global stability, it seems it’s finally time for manufacturers to celebrate. The industry is finding its mojo, once again. Optimism has reached a new high as manufacturers start reinvesting in IT infrastructure and terms like Industry 4.0, Smart Factories, Digital Transformation and 4IR (Fourth Industrial Revolution), inspire innovation. But, manufacturers must remain vigilant about their strategies, taking care to focus on projects which will achieve bottom-line results and sustain long-term growth.
Manufacturers can celebrate, but must remain alert. Seizing current opportunities with an aggressive, strategic plan will be critical. Agility is key. Confident decision-making based on Business Intelligence is also important. Modern software solutions give manufactures these tools.
R “Ray” Wang of Constellation Research talks about the ability of software to jump-start growth in the report, “Nine Starting Points for Digital Transformation in Manufacturing; Digital Trends Signal Manufacturing Renaissance Ahead.”
In the report Wang says, “…Digital transformation in manufacturing will not only jump start growth, but will also create the environment for a manufacturing renaissance…. Leaders should focus on creating new business models first and then enabling success with supportive disruptive technologies.”
The most critical, universal piece of advice that today’s experts, globally, are recommending: Take advantage of this growth period now. The stakes are high. It’s a “winner takes all” game. Do you have the technology you need to win?