Manufacturing Faces a Protracted Recovery Post-Pandemic

As if the freefalling numbers in the April 2020 Manufacturing ISM® Report On Business® weren’t bad enough news, the ISM Spring 2020 Semiannual Economic Forecast is out. The forecast, which projects the health of the manufacturing industry through the end of the calendar year, offers more of the same pessimism. Manufacturing is in for rough times in the back half of the year, and it could be many months before the numbers start to take a positive trajectory.

The headline of the report indicates broad contraction across the board: Economic Downturn to Continue Through 2020. For manufacturing, the figures associated with that downturn are staggering: revenue to decrease 10.3%; capital expenditures to decrease 19.1%; capacity utilization currently at 75.9%. Reprieve appears far off as COVID-19 persists and economic ripples worsen.

Manufacturing is on its heels

Manufacturing hasn’t taken blows this quickly or this intense since the Great Recession and the Great Depression. Not only is manufacturing expected to shrink in 2020, that contraction could be more rapid than we expect.

According to the report, manufacturing revenue is expected to decrease 10.3% in 2020. Alongside it, employment is expected to shrink by 5.3% by the end of the year. As a result, the report predicts a 19.1% decrease in capital expenditures. All of this adds up to a manufacturing economy in crisis: fewer dollars, less spending, and fewer jobs through the end of the year.

The only consolation for manufacturers is that this isn’t a sector-specific death sentence. Non-manufacturing businesses also will suffer through the end of the year, and general economic contraction is imminent if not underway already. The second and third quarters will be telling.

Robotic arms working in a factory

COVID-19 as a catalyst

Although COVID-19 represents the clear and present danger for manufacturers and the economy at large, it’s merely the catalyst for the tough times ahead. More damaging than the stay-at-home orders and factory closures are the disrupted supply chains and damaged purchasing powers of consumers.

“With 15 of the 18 manufacturing sector industries — including five of the six big industry sectors— predicting revenue declines for 2020, panelists forecast that recovery will likely not occur until near the end of the year,” said ISM Chair Timothy Fiore.

Until countries open their borders and the cash flow of the consumer economy kickstarts once again, producers face seemingly insurmountable obstacles. Unfortunately, predictions on the pandemic’s continuance through the summer and a possible resurgence in the fall have already-battered companies tentative about the future. Even if the economy does reopen for the third and fourth quarters, it’ll likely be met with caution and reluctance. Consumers would rather save than spend, and manufacturers will attempt to operate on a shoestring budget.

The result in all this is a protracted recovery. As was the case with the Great Recession and the Great Depression, the current economic crises — already dubbed the Great Lockdown — will follow history’s example. We’re seeing the quick and decisive crash; next, comes the slow and tentative recovery

It’s time to make smart decisions and investments in the future. As you batten down the hatches and pinch pennies on your balance sheet, consider the cost-effective benefits of third-party repair and maintenance. You can always count on the professionals at Global Electronic Services. Contact us for all your industrial electronic, servo motor, AC and DC motor, hydraulic, and pneumatic needs — and don’t forget to like and follow us on Facebook!
Call Now ButtonCall for Help