Manufacturing Outlook

The chief economist of NAM discusses the trends facing manufacturers today.

If you’re looking for some guidance on what the future holds for manufacturing, the National Association of Manufacturers has some ideas.

Chad Moutray, the Chief Economist of The National Association of Manufacturers (NAM), says the economy has been trending in the right direction over the past few months.

As he points out, “Manufacturing activity plummeted pretty dramatically in the February to April timeframe.” But the good news is that it’s “certainly trending in the right direction since then.” The rebound over the past three months has been encouraging, he says, but the caveat is that the growth is not back to where the economy was pre-pandemic.

He believes things will get back to prerecession levels by the end of 2021, though “I’m hoping I’m wrong.”

For manufacturers looking for advice during this time, Moutray says that trends that were happening before the pandemic are continuing. In talking to manufacturers, most say that plans that were in place beforehand are accelerating. For example, almost everyone he talks to says they are reevaluating their supply chain. The other ongoing trend is the embrace of technology, particularly automation and robotics. “Those two game changing trends means that coming out of this pandemic, they are thinking about how they operate and innovate and the workforce.”

He also notes that this pandemic has been disruptive on the consumer side as well. Depending on what business you are in, the market may have changed dramatically.

As companies look to grow, he says they are trying to figure out the labor market and lower levels of demand, which may require adjusting the level of production to match demand, he says. “Some manufacturing sectors are growing like gangbusters, while others are lagging behind.”

The manufacturing workforce has been affected in several ways, Moutray notes. “Are the workers they have going to be doing different things? They also may have challenges at home to grapple with.”

He said some Baby Boomer workers may decide now is a good time to retire—thinking “Enough’s enough”—which then leads to the question, “Does that exacerbate the skills gap?”  

According to a NAM survey, about half of their members say they are having trouble finding the right talent. Even with the current unemployment numbers, Moutray notes that this is a skills mismatch.

Various industries have weathered this crisis differently. As Moutray says, “Early on, motor vehicles were hit hard, but are one of the few that have bounced back.”

Others in the heavy durable space, aerospace, primary metals are struggling largely because of the global economy, he notes. This may require a vaccine or at least more certainty on the COVID front. In the meantime, medical equipment has obviously been on the other end of the spectrum.

“Some pockets of manufacturing are growing, such as computer and electronic products, with people working remotely and using technology in new ways,” he says, “and the push towards automation and robotics.”

According to NAM’s third quarter survey, as company size goes up, manufacturing optimism also goes up, which is a change from the previous surveys. Moutray attributes this to a correction from previous years. As larger manufacturers were most affected by trade wars, now they are bouncing back while small and medium sized companies are still facing challenges.

He notes that in the long run, people will adopt previous habits. “We will travel again at some point,” he says. “It’s not going to be tomorrow, it’s not going to be next month.”

The next edition of the NAM survey will be in the field mid-November, about a week after the election, and the results will be released in December.

Written by:  Michelle Bangert, Managing Editor, for Quality Magazine.