Manufacturing Outlook for 1st Quarter 2021
By: Anita Prizio, SEWN Outreach
For many Americans, 2021 could not have gotten here soon enough. The US economy remains in turmoil with fluctuating Covid numbers, continued restrictions, and vaccine questions rising. Predictions abound to what 1st quarter will have in store for us.
It is difficult to do an economic forecast in this environment, but JPMorgan was the first major bank to say 1st quarter GDP will decline by 1% because of the Covid surge, delaying hopes for expansion until the second and third quarter based on positive vaccination developments.
Based on the Oxford Economic Model (OEM), Deloitte has projected a decline in annual manufacturing GDP growth levels, with a forecast of -5.4% for 2021. On the other hand, according to Trading Economics global macro models and analyst expectations, US Manufacturing production is projected to trend around .70 percent in 2021.
Recovery forecasts tend to be uneven across sectors. For example, the chemical sector is expected to rebound in 2021 and grow by 3.2%, due to its role in COVID-related solutions. In general, those manufacturers in the aerospace, defense, energy have fared better than those in the automotive and commercial aircraft markets.
COVID-induced labor shortages will continue to be a challenge for manufacturers. When employers need to send employees home to quarantine, production lines need to be shut down, further stressing the supply chain and hampering economic growth.
PPE remains in short supply for some companies adding to the apprehension of employees as they contemplate returning to work. Institute for Supply Management reports PPE gloves have been “in short supply” for 9 months now, as has disinfectant and PPE masks. An effective and comprehensive vaccination distribution roll out will be the most effective method to assuage the fear of employees returning to work but even this plan is facing bumps along the way.
Ken Louie, Ph.D., director of Economic Research Institute of Erie (ERIE) said it best. “The most important economic lesson is that a relatively stable and robust economy can be devastatingly disrupted by sudden and unexpected non-economic forces. A corollary is that going forward, we should strive to build elements of resilience into all parts of our economy and society so we will be much better to withstand any future negative shocks to the system.”
Dr. Louie is right, manufacturers must build elements of resilience in their organization to withstand future “Black Swans” as we venture into 2021.