Adrian has been conducting research on, and managing teams of analysts covering, the technology industry for over 20 years. He has pioneered many data analysis techniques and methods that are used widely by analysts today, as well as having created frameworks for measuring numerous technology markets from industrial automation products to semiconductors.
Here at Interact Analysis, our function is to equip industrial planners and strategists with a reliable, data-driven analysis of the past, current and projected industrial landscape. One of the principal tools we offer our customers is our Manufacturing Industry Output (MIO) Tracker. This is a quarterly updated in-depth analysis of industrial output, covering a complete range of manufacturing sectors in all the major industrial economies across the globe. We use information gathered by our analysts on the ground – historical and current data – to identify trends and make informed forecasts. The MIO Tracker is an invaluable instrument for industrial captains navigating the stormy seas of COVID-19. This is our second MIO update to be published since the start of the pandemic, so our COVID-19 data is getting substantial. To do our bit to help global industrial companies, we are making the associated insight report available to all for free. Click on the link at the end of this article to download your copy…
COVID-19: Some key initial assumptions
Different regions will recover from the pandemic at different speeds, depending on the local measures taken to suppress the virus. We believe that ignoring COVID-19 will prolong the economic pain. That said, other factors can come into play. Germany, for example, has been relatively successful in suppressing the virus, but its export-driven economy is suffering because of the economic damage the virus has wrought in main export markets, such as the US.
We do not anticipate a swift return to normality for most countries. Few will emulate China’s recovery simply for the fact that measures taken there would violate privacy regulations and expectations if they were applied in other countries – particularly in the liberal, democratic West.
We believe a vaccine will be needed to restore normality to global markets. We anticipate one being available some time in 2021, but of course it might not happen in that timeframe, in which case we will be making a downward adjustment to our forecasts in future MIO updates.
The COVID crisis: an unprecedented period of pain for industries
Globally, all industrial sectors have suffered a COVID-19 induced downturn. Certain industries have been hit far harder than others. Lockdowns and a slump in sales have hit production in the automotive, aerospace and textiles sectors particularly hard. In Europe as a whole, we predict the market value of aerospace production will fall from $183.2bn in 2019 to $133.8bn in 2020 – a drop of -27%. Similarly, we predict the market value of production in the automotive sector to fall from $881.4 in 2019 to $650.8bn in 2020. A drop of -26.2% after an already bad year in 2019 (in the two previous years, the market value was over $900bn). Textiles comes in third in this casualty table, with a predicted -23.9% drop in production value between 2019 and 2020. There is only one sector in Europe predicted to show any signs of growth in 2020. Everybody has to eat and drink, hence we forecast that the food and beverage industry will grow by 0.3% in 2020. But job losses and furloughing on lower wages means that growth in spending on food and drink has slowed. 2017 saw a 5.8% increase for the sector, and 2019 a 1.5% increase.
Hand in hand with the fall in industrial production has come a slump in demand for dedicated machinery used in factories, and a resultant collapse in production of revenues associated with this equipment. Here again, our projected figures for 2020 are significant, with textiles machinery and metallurgy machinery, for example, seeing a reduction on 2019 dollar billion values of -42.6% and -23% respectively.
A glance at industrial production in Asia tells a slightly less depressing story, with the value of automotive production falling by a projected -17.4% for 2020, electricals and electronics equipment by -10.8% and aerospace by -10.7%. These figures are interesting. They are skewed positively by China’s individual figures, which are less negative (-13% for the automotive sector, for example). A result of the fact that China was first into the pandemic, and the first country to emerge from it. And don’t forget China’s aggressive measures to control the virus, with movement tracking and infection status apps, which other countries have shied away from using owing to the aforementioned privacy issues.
Our predictions for 2020 for the US largely track those for Europe.
Moving on to 2021…….
The graphic below sets out COVID data for a range of major economies, and our projected growth figures for 2020 and 2021. Note that modest positive growth is forecast for 2021 for every country, but don’t forget that this is year-on-year growth from disastrous 2020 figures. It will take economies some time to recover to 2019 levels.
Onwards and upwards… slowly…
We envisage the trajectory of recovery for many countries as being more than three years, with most countries not returning to 2019 levels of production until 2024. In this, our latest MIO update, we have slowed the predicted recovery time for India and Brazil, owing to the continued rampant nature of the virus in those countries. We expect the USA to get up to speed more quickly, however, despite it being the worst affected area, owing to the unprecedented use of stimulus packages designed to reduce the economic impact.
Germany, the powerhouse of Europe, will struggle to recover to 2019 levels by 2023, but indicators are that it will burst through the barrier in 2024, when, hopefully, normal service will resume across the globe. Let’s pray for that vaccine.
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