• Pat McGibbon

[Recap] May 2020 Manufacturing Technology Economic Forecasting Webinar

Updated: Jun 5, 2020

Mark Killion, Director of U.S. Industry Services for Oxford Economics, presented Oxford’s first forecast for the manufacturing technology market since January during the third installment of AMT’s 2020 Economic Forecasting Webinar Series. This time, Killion’s remarks were in stark contrast to the upbeat and optimistic outlook presented at the beginning of the year. The world and U.S. economies have changed considerably since then. 

Reality of the Pandemic Hits Home

Killion’s opening words set the tone: “The recovery phase will be irritatingly slow,” and it will take several years for our economy to return to the GDP levels of 2019. The crisis will accentuate trends already happening, such as market concentration, automation, the manufacturing digital thread, and a retreat from globalization. 

Key Assumptions Have Significant Risks

The solemn outlook is the keystone of Oxford’s baseline forecast the forecast most likely to occur among the range of projections they generated. Killion noted that the baseline forecast sits at the optimistic end of their four most likely scenarios. It assumes that lockdowns end in June, there are no further spikes in COVID-19 cases, government stimulus packages work, and income and employment rebound strongly. If any of these assumptions fail, the forecasts will be lower and take longer to realize. 

Impact on Manufacturing Technology Market

In January, Oxford projected a recovery in the manufacturing technology market to begin in June and lead to a modest 4% decline in 2020 over 2019. Oxford’s new projection is for a whopping 51% decline in 2020 relative to 2019 but a rebound of 84% in 2021. Still, this leaves 2021 order levels down 10% from 2019 levels. They project a 6% increase in 2022 and expect that manufacturing technology orders will not exceed the 2019 level until 2023. 

Where are the Opportunities?

Killion noted that not all markets and industries will recover at the same pace or time. COVID-19 decimated some countries while others were relatively unscathed. India, South Korea, Vietnam, Indonesia, and Mexico are expected to be among the nations with strong growth opportunities beyond 2021. 

Auto production is projected to fall by nearly 30% and to rebound by nearly the same in 2021. The aerospace industry is forecasted to break even with a rebound in 2021 that will offset the drop in 2020 production. Production rates in the fabricated metal products and electrical equipment industries are expected to surpass 2019 levels by the end of 2021. 

Medium Term Implications

Killion noted there are issues that will continue to impact the economy as COVID-19 fears dissipate. He expects savings by both individuals and businesses will increase at the expense of consumer debt and capital expenditures. Further, the pandemic will be expensive, and companies will look to restock reserves. Businesses are busy evaluating their supply chains, and North American suppliers are likely to benefit tremendously from companies looking to reduce risk. 

Millions of individuals will find that their jobs were eliminated, and it will be months before activity requires their former employers to step up capacity. In many cases, businesses are likely to take deeper looks at new technology before adding more people. It also creates a significant deficit in the strength of consumers. Consumers have been the key to driving the economy out of post-World War II recessions with a few exceptions.

Killion summed up the U.S. outlook as “lower for longer,” which he characterized as lower growth and lower inflation for a longer period of time. This will have the GDP and the economy back to pre-COVID-19 levels by mid-2021. Manufacturing technology orders will accelerate shortly afterward. 


After the webinar, Mark fielded several questions from our audience. The questions and his complete answers are below.

What do you see to be the potential of the Fed adopting yield curve control?

This is a very strong possibility; indeed, a version of it has been a feature of Fed policy in recent years. That policy could become even more explicit on the long end of the yield curve if bond yields begin to rise much faster than warranted by the pace of U.S. growth in the recovery period. This could happen if the rash of new government debt issuance begins to scare investors, or if the foreign demand for U.S. debt wanes. For example, if their own domestic yields become more attractive, or if protectionism and trade wars further erode the international movement of capital.

How do you think the crisis will affect the trade show industry? Short term and long term?

That is a good question. Perhaps the short term is more obvious than the long term while we struggle against the active period of the pandemic. My guess is that trade shows will make a comeback after nine to 15 months, assuming medial technology can help with virus mitigation and remedy.

Over the longer run, there will surely be structural changes that will also shift the trade show industry. For example, technologies related to augmented reality, use of avatars, automation, and artificial intelligence will probably mean that industry trade shows will have to evolve, perhaps even reinvent themselves to a degree.

Over the next five years, what industries do you expect to perform best or have the best growth? Why?

The fastest growth over medium term is expected to come from:

  1. Internet related, such as search portals and cloud computing

  2. Software, often related to AI, IoT, automation

  3. Healthcare

  4. Government sector

Why? Due to the large but increasing penetration of internet and media in personal and business activity which is reflected by the rising share of business spending being put toward intellectual property products, including R&D, and the use of AI and automation in production. Healthcare is on a longer term secular trend, only exacerbated by an aging population and, now, the pandemic. Government spending is boosted by providing support for economic growth during and after the current recession. Also, massive amounts continue to be spent on defense, such as for military vehicles, missiles, satellites and space gear, also related to cyber warfare. Finally, the need for state and local governments to spend on upkeep of infrastructure, even before any attempts are made to build out new infrastructure. Will declining trade eventually help U.S. manufacturing because we have the largest goods trade deficit?

Declining world trade will hurt the exports from U.S. businesses, so is not likely to help the U.S. trade deficit. Also, since U.S. imports are so much larger than U.S. exports, hence the deficit in trade, it seems more likely that developments in domestic demand (which drives U.S. imports) and the state of U.S. competitiveness will have the bigger impact on the U.S. balance of trade.

Can you comment on the possibility of inflation and how much there might be?

Inflation is not an issue for this year; indeed, deflation seems like the bigger concern. See the attached article for a more comprehensive take on this topic.

When will manufacturers start investing money again in new manufacturing technology?

This most likely will occur once production and profits recover, which is expected to begin in earnest by Q4 2019 and Q1 2020. However, the amount of spending will not recover to the levels seen in Q4 2019 (pre-pandemic) until the end of 2020 or start of 2022.

The Economic Forecasting Webinar series continues with sessions in June, August, September, and November. Stay tuned for more information and directions on how to sign up for these free webinars.

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