Jan 15, 2020 - Economy

Manufacturing should bounce back in 2020

Illustration: Aïda Amer/Axios

Last year was one to forget for the world's manufacturers, as industry metrics declined to some of the lowest levels in years.

The state of play: Investors and industry insiders see the sector mounting a comeback in 2020 as the trade war and tariffs are expected to recede, global demand is expected to increase and companies begin to reroute their supply chains.

Why it matters: The sector remains a leading indicator of economic health and was notably hobbled in 2019 by the U.S.-China trade war.

  • A bounce-back could help reverse the slowdown that has dragged global economic growth to its lowest since the 2008-2009 financial crisis.

Flashback: After seeing a boom of jobs growth in 2017 after President Trump was elected, gaining nearly 500,000 jobs in his first 30 months in office, the industry's job gains slowed to a near standstill in 2019.

  • The U.S. economy netted just 46,000 manufacturing jobs total last year and added a net 9,000 in the last six months.

What we're hearing: Steve Rosen, who invests heavily in manufacturing companies as CEO of Resilience Capital Partners, tells Axios he's "feeling much more positive about 2020" and expects a rebound in the second half of the year, as companies are forced to make up for 2019's weak spending.

  • "If you haven’t been buying trucks and you have a fleet ... eventually, you’re going to go out of business or you’re going to have to replace them," he says.
  • He's also hopeful the "phase one" trade deal between the U.S. and China will help revitalize the agriculture sector, prompting more sales of farming equipment, and drive demand from overseas.

Tom Derry, CEO of the Institute for Supply Management, which has tracked manufacturing since the 1940s, and last month recorded the industry at its weakest level since 2009, also is bullish. He expects to see signs of a turnaround within the next few months.

  • "I can’t read the future, but it would be unusual for us to be at this level for much longer," he tells Axios.
  • Companies surveyed by ISM have begun to reroute their supply chains out of China and are finding alternate partners and suppliers, Derry says.
  • "We’re about a year and a half into the trade war, and we’re now starting to see the reconfigurations have a positive impact."

Yes, but: "I definitely would be concerned if we saw significant further deterioration," Derry says. "But I don’t expect that."

Go deeper:

Go deeper