Manufacturing Sizzles in Latest Forecast

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Manufacturing Sizzles in Latest Forecast

Posted By : | Date : December 24, 2020

High-level analytical models from Armada and MN&A show that the outlook for manufacturing over the next 18 months is likely to be well ahead of its 20-year average growth trend. The latest forecast released in the Armada Strategic Intelligence System (ASIS) shows industrial production for manufacturing growth of 5.22% in 2021. This comes after a 2.6% contraction in 2020.

The outlook shows a sharp recovery period lasting through October of this year before easing and flattening out through July of next year (note the ASIS chart showing the forecast).

Industrial production manufacturers were reporting that they were still having challenges getting component parts and raw materials flowing consistently through their supply chains sufficient to keep assembly lines uninterrupted through early February. Supply chain congestion is expected to continue to impact total industrial production output well into Q2 of this year.

The data models used in creating this forecast use 18-20 different economic variables and the models were trained over the past 20 years of data. The changes that the models are picking up in the last quarter of 2021 are interesting, and we can explain them in a simple way.

Something significant happens when the pandemic is largely in the “rearview mirror”. There will likely be an inflection point in 2021 when the services sector starts to reopen (as a result of increased consumer mobility) and consumer spending will partially transition from heavy product consumption to more services-related spending on experiences (travel and tourism, entertainment, restaurants, and bars, concerts, etc.).

Interestingly enough, several of the industry models included in the ASIS were showing similar softening outlooks in the latter part of 2021. Aerospace, electrical equipment/appliances, fabricated metals, machinery, and primary metals were all showing this “flattening of the curve” between Q3 of 2021 and June of 2022. The automotive and computer models showed continuous acceleration through the end of the year and into 2022.

The next update of the ASIS models will be released in the last week of February.

The Armada Strategic Intelligence System (ASIS) is a continuous, monthly updated forecast covering the durable manufacturing sector. It includes 18-month continuous forecasts for automotive, aerospace, computers and electronics, electrical equipment and appliances, fabricated metal products, machinery, and primary metals. It also covers supply chain issues, helping executives see well into the future so that they can make operational adjustments well in advance of cyclical changes in the marketplace. Manufacturers, financial analysts, supply chain managers, sales executives and a wide variety of occupations across many industries subscribe to the ASIS.

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