Charting the Manufacturing Landscape for 2024
by Rich Hobbs
President & CEO
Manufacturing Colleagues,
Richard Hobbs
Based on our engagement with the manufacturers we serve, clients currently remain positive even though they are prospering to varying degrees based on their industry. We noted there are shared observations amidst their individuality, but certain trends prevail. Supply chain concerns show signs of stabilizing. Recruiting is showing improvement overall, but manufacturers are still grappling with securing mechatronics and tech-oriented talent, a persistent challenge. There is a noticeable uptick in wages. Simultaneously, the surge in interest rates poses potential limitations on cash flow. Nonetheless, there is still an overarching sentiment that business is still looking positive in the long term.
November Regional Manufacturing Outlook Survey
Survey — Manufacturing Indicators, Pricing, and Future Indicators
Manufacturing Business Outlook (Federal Reserve Bank/Philadelphia)
Note: Survey responses collected from November 6 to November 13, 2023
“Responses to the November Manufacturing Business Outlook Survey suggest a decline in overall regional manufacturing activity this month. The indicator for current activity rose but remained negative, while the shipments index turned negative, and the new orders index remained positive but low. On balance, the firms indicated mostly steady employment, and the current price indexes continue to suggest increases in prices. The survey’s broad indicators for future activity suggest respondents’ expectations for growth over the next six months were subdued.” For more details: PDF Version
Navigating Uncertainties
Navigating through future uncertainties requires manufacturers to face a multitude of crucial decisions. Expansion, acquisitions, and talent acquisition strategies hang in the balance as decision-makers opt for a cautious approach, postponing significant actions until a clearer trajectory emerges in 2024. Challenges in talent attraction and retention prompt options in automation to counter workforce limitations, albeit with associated investment costs. Despite a semblance of stability in supply chains, there are ongoing risks of disruptions, contingent upon the unique landscape of each industry.
Consumer Dynamics
While manufacturers primarily operate in the B2B realm, the reverberations of consumer dynamics significantly impact our industry. The evolving consumer landscape constitutes a significant force influencing two-thirds of the economy. Consumers are grappling with a staggering rise in new car loans, soaring mortgage rates, and persistent inflationary pressures, particularly evident in energy and food prices which shape a cautious consumer spending environment.
Geopolitical Turmoil
On the global front, geopolitical turmoil exacerbates the climate of uncertainty. Ongoing conflicts such as wars in Eastern Europe and the Middle East reverberate across economies and threaten to disrupt supply chains and exert further strain on global stability.
Scouting the Landscape
Despite the ambiguity inherent in peering into the future with a myriad of variables and unpredictable factors, there is encouragement. Since C-19, policymakers finally recognize that we cannot rely on top geopolitical rivals for critical things we need for our national and economic security. Therefore, government investments are helping, such as the Inflation Reduction Act and the CHIPS and Science Act to incentivize domestic manufacturing, albeit the release of dollars can be slow and bureaucratic at times. Despite the challenges and possible headwinds, the future of manufacturing is still positive.
According to a recent Deloitte study, “Significant investment and growth in the US manufacturing industry is expected to continue in 2024. Continuing to embrace new technology and digital transformation will likely be important for manufacturers as they look for ways to capture the opportunity at hand and tackle the challenges they face…” Deloitte 2024 Manufacturing Outlook
We’ve Got an Edge!
Let us not forget that the United States is experiencing a renaissance in manufacturing. According to LVEDC’s 2022 Year-in-Review, manufacturing is leading the way. The Lehigh Valley gross domestic product reached a record-high $47 billion in 2021, bigger than the GDP of the states of Alaska, Vermont, and Wyoming. Manufacturing has grown to become the region’s top economic sector, with an economic output of $8.4 billion. Also, Pennsylvania is well-positioned for continued growth thanks to its economic development and manufacturing initiatives, as well as the reduction of Pennsylvania’s corporate net income tax and several other business tax reform measures.
The Lehigh Valley also led Pennsylvania’s job recovery from the sharp economic downturn caused by COVID-19, tracking well ahead of the national recovery. By June 2022, employment in the Lehigh Valley reached a full recovery of the jobs lost two years earlier due to the pandemic. When C-19 came along, manufacturers here stepped up to the fight and demonstrated amazing resilience and agility, a trial run for greater preparedness.
With good reason, employers are attracted to our location and accessibility to major East Coast markets, a talented workforce, and quality of life. As is characteristic of our region’s culture, let us embark upon the new year with determination and an unwavering commitment to navigate the variables ahead. MRC is here to help you overcome any hurdles and to deploy new strategies. As we forge ahead, let us collectively endeavor to mitigate uncertainties and chart a course toward a prosperous 2024.
To all of you who have dedicated your careers to the manufacturing industry, your hard work and dedication fuel the economy and are crucial to national security. MRC sends you our gratitude and we thank you!
Best regards,
Richard Hobbs
President & CEO
Manufacturers Resource Center
rich.hobbs@mrcpa.org
(484) 895-9866
Video courtesy of LVEDC