Machinery production: A correction or contraction?

With the global economy slowing down, machine production is likely to follow suit.

09/12/2011


Following a generally strong recovery in 2010, the economic outlook at the start of this year appeared to be a reasonably positive one. There were caveats, certainly; Greece’s debt crises and the potential of economic fragility in Ireland and Portugal affecting the Europe to mention two. But these were, on the whole, considered to be diminishing threats to a solid economic recovery. However, the past few months have seen seemingly an endless stream of news items pertaining to further economic woes: first quarter GDP figures were revised down in the UK, the US, Germany and France; many countries GDP forecasts were revised down for the year; the US lost its triple-A credit rating (at least in the eyes of one major ratings agency) and came close to defaulting; Greece requiring a second bailout; the decimation of share prices around the world. The list goes on. 

So, economic output is slowing, that much is evident. But what does it mean for machinery production? Traditionally, machinery production is more-or-less in phase with GDP, so a slowdown in the economy doesn’t really bode well. There are also figures on machinery that point to things slowing down; indices released by the US, Germany and Japan all point to the rate of growth slowing in recent months. 

However, before pressing the panic button, there are a couple things to bear in mind. The first is that following the incredible growth seen in 2010, there was always going to be a point where the rate of growth slowed down. It was simply never going to be the case that production continued to grow at the rate seen throughout last year; things had to cool down at some point. The second consideration is that machinery output this year is generally still far above where it was last year. In 2011, machinery production will increase beyond the levels seen in 2010 – according to our latest forecast output will grow by 10.2% in 2011. 

If the slowdown means that global machinery production growth falls from 17.2% in 2010 to 10.2% in 2011, then there is an argument that such a slowdown is nothing to worry about. Perhaps a slowdown in growth was inevitable; however, a continuation in the trend would certainly point to a problem down the road. The question that hangs over the economy in general is the same as the one that hangs over the machinery sector: is this slowdown a correction after a steep recovery last year, or is it the start of a more protracted contraction? At the moment we feel the likelihood lies with this being an inevitable settling-down following the terrific growth of last year, but not the start of another down period. Of course, only time will really tell. 

This sentiment is reflected in our machinery production forecasts (graphic below) which are updated on a quarterly basis. 

Graph explaining machinery production growth by region from 2006-2015. Courtesy: IMS Research



No comments
The Engineers' Choice Awards highlight some of the best new control, instrumentation and automation products as chosen by...
The System Integrator Giants program lists the top 100 system integrators among companies listed in CFE Media's Global System Integrator Database.
The Engineering Leaders Under 40 program identifies and gives recognition to young engineers who...
This eGuide illustrates solutions, applications and benefits of machine vision systems.
Learn how to increase device reliability in harsh environments and decrease unplanned system downtime.
This eGuide contains a series of articles and videos that considers theoretical and practical; immediate needs and a look into the future.
System integration: Best practices and technologies to help; Virtualization virtues; Cyber security advice; Motor system efficiency, savings; Product exclusives; Road to Hannover
Collaborative robotics: How to improve safety, return on investment; Industrial Internet of Things, Industrie 4.0: World views; High-performance HMI, Information Integration: OPC and OMG
9 tips: How to integrate a servo system; Process control mathematical models; Serial network grounding; Engineers' Choice Awards; Learn from cyber security mistakes
This article collection contains several articles on the Industrial Internet of Things (IIoT) and how it is transforming manufacturing.
PLCs, robots, and the quest for a single controller; how OEE is key to automation solutions.
This article collection contains several articles on improving the use of PID.
Learn how Industry 4.0 adds supply chain efficiency, optimizes pricing, improves quality, and more.

Find and connect with the most suitable service provider for your unique application. Start searching the Global System Integrator Database Now!

Getting to the bottom of subsea repairs: Older pipelines need more attention, and operators need a repair strategy; OTC preview; Offshore production difficult - and crucial
Digital oilfields: Integrated HMI/SCADA systems enable smarter data acquisition; Real-world impact of simulation; Electric actuator technology prospers in production fields
Special report: U.S. natural gas; LNG transport technologies evolve to meet market demand; Understanding new methane regulations; Predictive maintenance for gas pipeline compressors

(copy 5)

click me