One of my favorite market intelligence companies, Interact Analysis, published its quarterly industrial market update last week. The highlights:
- Slow recovery out of pandemic predicted up to end of 2023 or into 2024
- Manufacturing output growth calculation for 2020 revised up from -3.9% to -3.6%
- Semiconductors: crash in the market expected in late 2023 or early 2024
- Quantitative easing will cause inflation in some regions
Market intelligence company Interact Analysis has just published the latest quarterly update of its Manufacturing Industry Output Tracker (MIO). The report announces the inclusion of data from three key new regions – Malaysia, Indonesia, and Vietnam; and predicts a slower-than-previously-expected global recovery from the pandemic. Good performances by the US, South Korea and China are offset by regions such as Europe and Japan, which have struggled with the pandemic but are expected to make a swift recovery, and India and Brazil, which continue to fare badly and are expected to see a slow recovery. Problems in the semiconductor sector are already holding back the manufacturing sector, while inflation is a black cloud on the horizon.
The COVID-19 vaccine roll-out has been uneven, meaning some economies will open up more slowly than others. The EMEA region (Europe, the Middle East and Africa) in particular has fared relatively badly. In February 2021, for example, while the UK registered 89.8 vaccination doses per 100 people, Germany registered only 54.2. France and Italy currently measure 48.6 and 51.9 per 100 respectively. The region saw a major hit to the economy in 2020 with growth slumping by around -10%, and the slow vaccination rate will keep growth down to 6% in 2021. The US is currently running at around 85.4 doses per 100 people and the economy should be fully open by this summer, turning a relatively modest negative manufacturing growth of -3.7% in 2020 into positive expansion running at 6.4% in 2021. The terrible news coming out of India means that recovery is going to be slow, likewise Brazil, both having the daunting task of turning around from double digit manufacturing declines in 2020 (India: -12.6%; Brazil: -15.8%). They are both projected to achieve a relatively modest year on year growth of around 6% in 2021. China is the only country that saw positive manufacturing growth in 2020 (1.9%) and is now back to normal levels of production, in spite of a limited vaccine roll-out.
A combination of factors has led to a serious shortage of microchips, with major repercussions for the electronics and automotive sectors, and a consequent knock-on effect for industrial automation companies. This is hampering recovery in many regions. In the longer-term, the research shows that the current period of unusually strong semiconductor growth as a result of the shortage will be followed by a crash in the market sometime around the end of 2023 or the beginning of 2024. This is being driven by two factors: semiconductor companies are investing in new capacity to deal with current elevated demand, and semiconductor customers are currently stockpiling and will soon have more than they need.
Adrian Lloyd, CEO at Interact Analysis, comments: “These have been incredibly difficult times for the global manufacturing sector, and we’re by no means out of the woods yet. The chip shortage will continue for some time to come. Furthermore, the vast scale of quantitative easing and financial support that was applied by governments during the pandemic, amounting, for example, to a massive 54.5% of GDP for Japan, and 39.5% and 26.5% for Germany and the US respectively, means that serious inflation is almost inevitable in some key regions. The effects of covid are going to stretch some way into the future.”
About the MIO
This edition of the MIO has expanded coverage of Southeast Asia, with key manufacturing regions Malaysia, Indonesia and Vietnam now included. All datasets in the report have been revised to include the new regions, so historic aggregates will be different. Our data analysts have been hard at work, and, with a full year of monthly indicators for 2020, and figures for Q1 of 2021 now under our belt, we are confident that we have a clear picture of the damage caused by the pandemic to global industry. More importantly, we have been able to hone our predictions for future performance on a global and regional level. For further information, click here.
About Interact Analysis
Interact Analysis is an international provider of market research for the Intelligent Automation sector. Our team of experienced industry analysts delivers research into three core sectors: industrial automation, robotics and warehouse automation, and commercial vehicles. Intelligent Automation – which is the integration of artificial intelligence and automation – will change virtually every industry imaginable. This combination enables greater efficiencies, productivity, convenience, and scale. It has the potential to drastically alter the outlook for many traditional industries such as manufacturing, healthcare and automotive as well as to lead to the emergence of entirely new industries.