Maintaining profitability in manufacturing amid changing costs, purchasing delays
Depending on who you ask, the global economy is already in a recession.
During an economic forecasting session focusing on the outlook for U.S. machine tools at a recent MTForecasting conference hosted by AMT, Mark Killion, Oxford Economics’ director of U.S. Industry Services, said that with global conditions deteriorating, a recession touching countries around the world is inevitable.
Europe is already in recession and will experience worse impacts than the U.S., and China’s Zero COVID-19 policy has slowed that economy significantly, according to Killion.
The U.S. is already in a recession, but it won’t be official until Q3 numbers come out, according to Killion. He predicts that during the first half of 2023, we will be in recession, and then will slowly pull out. This recession is expected to be shorter than most due to unemployment rates being low, which is unusual for a recession. He also anticipates inflation will begin to slowly decrease around the middle of 2023.
Despite it all, businesses have remained profitable through supplier price increases since those increases have been passed along to customers. In our industry, supply chain disruption is easing, but demand still outstrips supply.
High demand continues
The machine tool industry is navigating the volatility very well due to demand remaining high and, thanks to those costs being passed along, revenues are rising. Killion said the machine tool industry will pick back up at the end of 2023 with a significant increase into 2025 back to pre-COVID levels.
Thanks to the high demand in our industry, Weldon Solutions is nearly finished expanding our headquarters facility. As customer demand for CNC grinders and custom solutions for industrial automation projects continues to rise, Weldon is expanding its production shop and warehouse by 18,000 square feet and its office by an extra 3,000 square feet. The addition will bring the facility to 61,000 square feet.
This 21,000-square-foot addition will allow us to increase production and assembly areas to better meet the needs of our customers for years to come. The facility expansion also is expected to create additional job opportunities and bolster employee ownership at Weldon.
Back to Killion’s economic forecast, for companies in our industry, spending is currently focused on technology, especially automation and digitization. Businesses are also switching to electric vehicles and looking at batteries and power storage, decarbonization of their production processes and infrastructure spending.
According to Killion, there are key risks to economic growth globally. They include gas rationing in Europe, which could slow growth; high inflation regime care of Federal Reserve policies; an advanced economy deep recession, and slower policy tightening.
Weldon is uniquely positioned to navigate the short-term challenges in front of us and looks forward to leveraging our increased facility capacity in 2023 to support our industrial customers.