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Manufacturing growth not predicted…

Manufacturing growth not predicted until 2025

Despite a tough year ahead for most regions and territories in 2024, growth will return in 2025 for many sectors.

In line with Interact Analysis’s previous update to its Manufacturing Industry Output (MIO) Tracker, the company’s latest forecasts show the lowest point in the manufacturing cycle for many regions and sectors is expected to occur this year.

Despite this, key regions such as the US and Germany will shrink half as much in 2024 as they did at the height of the COVID-19 pandemic. In contrast with most industry sectors, the semiconductor segment is expected to have a much better 2024, following a difficult year in 2023.

One of the most significant adjustments Interact Analysis has made to its long-term outlook is the prediction of slower growth for the machinery segment over the next five years due to a weak 2023, a contraction in 2024, and concerns regarding 2025. However, the expected CAGR for APAC manufacturing between 2023 and 2028 is expected to be positive at 2.9 percent, followed by the US (2.4 percent) and Europe (2.4 percent).  

In the US, the Federal Reserve shows no signs of cutting interest rates yet, suggesting the region will suffer a difficult 2024, with negative growth potentially continuing into 2025. The US economy is expected to shrink by 2.2 percent in 2024, before bouncing back to 3.8 percent In 2025, and there does not appear to be a huge demand or supply-side problem, so the downturn is not likely to be as severe as during the pandemic.

In Europe, the economic outlook for 2024 looks just as bleak. Italy is in one of the worst positions, with machinery production expected to shrink by 3.7 percent in 2024 and the manufacturing sector to contract by 1.5 percent. As a result of falling wage increases and decreasing employment levels, the Italian economy is set to struggle. Interact Analysis is also predicting a manufacturing decline of -0.8 percent for Germany in 2024 and -1.3 percent for France.

The UK is predicted to continue struggling while it navigates the challenges associated with a post-Brexit economy. Interact Analysis’ prediction for the UK’s manufacturing sector outlook overall in 2024 is -0.4 percent and -3.3 percent for machinery

“While everything seems so doom and gloom, we are seeing positive order books for semiconductor machinery. This sector is in an odd position currently; as demand for semiconductor machinery increases, the production of semiconductors themselves has all but collapsed,” said Adrian Lloyd, CEO at Interact Analysis.

“North America’s order growth for semiconductor machinery has reached over 50 percent – likely due to the CHIPS and Inflation Reduction Act – while Europe and Taiwan also continue to place orders. Although 2024 will be a tough year for the global manufacturing industry, our predictions suggest that the severity of the growth trough will be mild for most regions.”

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