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Outlooks on the U.S. Manufacturing Economy

Get answers from leading economists who provide financial outlooks for manufacturing. Pick up even more details about changing economic factors and their impacts at AMT’s MTForecast 2023 conference in October.
Sep 19, 2023

Before manufacturing companies can set a smart business strategy for 2024, they need answers to questions about interest rates, a potential recession, and the impact of reshoring. We spoke to three leading manufacturing industry economists and asked them to share their outlooks for the next year: Mark Killion, CFA, director of U.S. Industries at Oxford Economics; Alan Beaulieu, president of ITR Economics; and Chris Chidzik, principal economist at AMT – The Association For Manufacturing Technology. All three experts will speak at AMT’s MTForecast 2023 conference. Register now

Is a recession coming? 

The economy over the last year has held up better than most economic experts expected. But according to Killion and Beaulieu, despite the strong start to 2023, the industry can expect a shallow recession in early 2024. Higher capital costs will continue to weaken demand for machinery and machine tools in many sectors. However, some durable goods sectors with pent up demand will fare well.  

“Manufacturers in transportation equipment, motor vehicles, aircraft, space vehicles, missiles, and medical equipment will have a more secular boost going for them as they catch up on production and rebuild inventories hit during the supply chain crisis,” Killion says.  

Beaulieu says the mild downward pressure on manufacturing will continue throughout 2024, but the presidential election may spur some people to falsely predict a more severe recession. 

“Gross domestic product will be essentially flat with a mild negative bias in a couple quarters,” Beaulieu adds. “I hesitate to call it a true recession, but there will be a small negative bias in a couple quarters.” 

Will interest rates go up or down?  The Federal Reserve Board raised interest rates in July, which has had an immediate impact on sectors that are especially interest rate sensitive, such as housing and construction. However, Killion predicts that rates will maintain steady in the short term. 

“Based on the data, we don’t expect further interest increases from the Federal Reserve anytime soon,” Killion says. “Economic growth and GDP has been surprisingly strong even up through the last quarter, but there are signs of deceleration even in the strongest markets as consumer spending and business investments slow down.” 

At AMT’s MTForecast 2023 conference next month, Chidzik will discuss the results of the Gardner Capital Spending Survey, which projects spending on machinery, cutting tools, and workholding as reported by survey respondents. In addition, he will co-host a breakout session about the most recent trends in AMT’s benchmarking surveys that cover the same technologies. 

“The U.S. Manufacturing Technology Orders (USMTO) reports have shown some interesting trends in machine technology investments so far this year,” Chidzik says. “Job shops have been reducing orders, but purchases from OEMs have offset their decline. Although orders are down from the peak in 2021 Q4, they still remain at historically elevated levels partially because of increased investments from the automotive sector, as well as manufacturers of metal valves and power generation equipment. We will explore these trends and many others that can be pulled from the data in the breakout session at MTForecast.” 

What’s happening with reshoring?  The Inflation Reduction Act and CHIPS Act have spurred a sharp rise in new factories, especially for the electronics sector, with the Midwest region seeing the highest construction spending increase (166 percent), according to Killion. 

Companies are looking to mitigate quality, supply chain, and geopolitical problems by bringing manufacturing closer to the customers. Beaulieu says that brings both good news and bad news for the manufacturing industry. 

“The good news is manufacturers will gain economic strength in this country and secure our economic wellbeing for generations to come. But for the individual manufacturer, there will be higher competition for workers in an already labor-scarce market, and that problem will persist for years,” Beaulieu explains. “The only hope for companies to survive is to drive efficiencies by adopting automation and other advanced technologies.”   

According to Killion, the past year has seen a deep decline in electronics such as computers and semiconductors, but that will change soon. Automotive manufacturing in particular will drive a higher demand for semiconductors. Plus, he says the push for green energy has kept up demand for electrical engineering products.   

“Recent large subsidies and a move toward electric vehicles will provide opportunities for manufacturers as more plants open and there’s higher production of batteries and semiconductors,” Killion says. 

Hear more economic forecasts from Killion, Beaulieu, Chidzik, and learn about other segment growth opportunities from experts at AMT’s MTForecast 2023 conference, Oct. 4-6 in Detroit, Michigan. MTForecast is a unique opportunity for manufacturing business decision makers to get the information they need in a single place to make strategic business decisions. The conference features presentations from industry leaders, interactive workshops on market topics, and networking opportunities to expand your network. Register for MTForecast on the event website

Christopher Downs
Director, Audience Development
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