2020 Manufacturing Industry Outlook

Manufacturing at continued risk for disruption

2019 began with the US and global manufacturing sectors experiencing continued growth, though recently the manufacturing sector has slowed as the risk for a downturn in global manufacturing increases. The global purchasing manager’s index (PMI) in September recorded its fifth month below 50.0, which is the level that symbolizes the divide between expansion and contraction. While US manufacturing indicators have been positive through the first two quarters of 2019, in August the US PMI joined the global trend with its first below-50 reading (49.1) in more than three years. Deloitte projections based on the Oxford Economic Model (OEM) anticipate that modest annual manufacturing GDP growth levels may be tapering for 2019/2020, with projections of 2.7 percent for 2019 and 1.3 percent for 2020, lower than our prior projections of 3.7 percent for 2019 and 2.0 percent for 2020.

As we indicated in our 2019 Outlook, the historically tight labor market was a potential constraint on the industry’s momentum. This year has seen muted job growth in the manufacturing sector, adding an average of 6,000 jobs per month to date in 2019, compared with an average of 22,000 jobs per month in 2018.¹ Even with the slowdown in hiring, manufacturers still report difficulty filling critical jobs. Another often-discussed constraint to continuing manufacturing’s momentum has been the ongoing uncertainty in tariffs and their subsequent impact on trade flows. Costs throughout the manufacturing value chain are seemingly impacted every day. The uncertainty appears likely to continue into 2020, and thus manufacturers’ optimism has experienced a noteworthy setback. Compared with the 2018 Manufacturers’ Outlook Survey report, which noted 93.9 percent of manufacturers had a somewhat or very positive outlook on business, the latest report shows that just 67.9 percent are optimistic, with the remaining 32.1 percent having a negative outlook.² This mixed view of the sector is expected to be the prevailing sentiment for 2020.

How will manufacturing weather the storm?

The coming year promises to be an ever-changing environment for manufacturers as they try to regain their footing amidst continued volatility in costs and policy decisions. While the potential for uncertainty may continue for the foreseeable future, manufacturing leaders should increase resilience in their operations and double down on the core of their portfolios. Levers to support this include building “digital muscle” across areas like the supply chain, mobilizing partnerships within their ecosystem to drive targeted business goals, and leaning into corporate social responsibility. Manufacturing leaders can begin by examining current supply networks and considering how they could build additional agility throughout, including adding digital technologies that increase visibility and transparency to drive the ability to flex production and resources as necessary.

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• 2019 Industrial Manufacturing Industry Outlook