As we step into the Year of the Wood Dragon, a symbol of power, nobleness, honor, luck, and success, 2024 promises to be a groundbreaking year for manufacturing. Despite global uncertainties across geo-political issues and global economic patterns, there's an air of cautious optimism. This blog explores the pivotal manufacturing trends across economics, business, and technology, with a primary focus on the United States and China, offering insights and predictions from our team.
The Top 3 Manufacturing Trends to Watch in 2024
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Contrasting Manufacturing Outlooks: American Resilience and Chinese Economic Struggles
The expected economic downturn predicted by economists in early 2023 did not come to fruition. United States unemployment rate is at a historic low, the S&P 500 has reached peak levels, and wage growth outstrips inflation. Overall, these are good signs for the United States economy.
Despite this, the companies we have spoken with express more concern than optimism about the future. While high interest rates have pushed down inflation, it will take time to break the inflationary mindset. Additionally, the lending cost is higher than most businesses have been accustomed to after decades of very low interest rates. Most economic projections predict that both interest rates and inflation continue will be lower, but not enough for the peace of mind of consumers and businesses.
MTG maintains a cautiously optimistic view of the US economy and anticipates ongoing expansion in manufacturing across the United States and Mexico.
Contrarily, the Chinese economy presents unique challenges. According to The Guardian, COVID-19, price increases, and the desire to “de-risk” China have exacerbated pre-existing structural issues. These include overcapacity, an overheated real estate market, and lacking overall demand. Our team has identified several macro-level issues, such as rising wages and businesses struggling to hire enough workers or sell their products. An increase in company consolidations and enhanced government investment in large entities is anticipated.
China may fall short of its growth predictions, but this doesn't diminish its potential for business. The current economic slowdown allows companies to effectuate significant improvements and add value to their manufacturing operations. Our experience suggests that the capacity within most Chinese manufacturers is sufficient to counterbalance the increased costs caused by the aforementioned structural issues.
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The Real Impact of AI on Manufacturing: Hype vs. Reality
In 2024, AI is set to become the defining trend in technology, mirroring the popularity of terms like "NFT," "blockchain," and "Uber" in past years. While some may argue it's overhyped, its applications, particularly in manufacturing, are proving substantial.
MTG is collaborating with a developer on an AI tool designed for cost-effective visual inspection, capable of identifying and adapting to quality issues. Despite the potential for overhyping, AI's utility in improving reporting processes, particularly for non-native English speakers, is evident. However, healthy skepticism remains regarding some of the loftier claims about AI's capabilities. This careful approach reflects a balanced view of AI's role in technological advancement and its impact on manufacturing efficiency.
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Business Outlook: A Cautious Optimism in a Positive Economic Landscape
Understanding the distinction between business and the economy is crucial. The economy involves how a country’s resources are allocated by individuals and entities, while business focuses on profit-generation organizations. These terms are often used interchangeably, though they represent different concepts. Just as what is good for an individual business or industry may not be good for the economy as a whole.
Despite a generally positive economic climate, the business outlook remains cautious in the United States, particularly regarding China. Supply chain restructuring is underway, yet the future shape of global supply chains remains uncertain. The shift towards Mexico, Vietnam, and to a lesser extent, India, has led to escalating costs. Vietnam faces challenges in upgrading its infrastructure to meet the increased demand, particularly affecting manufacturing in Vietnam. Businesses are encountering unique obstacles in these countries, complicating operations and growth strategies.
All that said, there are good reasons to be optimistic about 2024 and we believe that the US economy will continue to grow through the year, and the reduction in inflation will mitigate falling pent up demand from COVID. Growth might be a bit slower than 2023 but we expect it to continue.
2024 Outlook: Cautious Optimism in Manufacturing
2024 is likely to see a general continuation of many of the trends we saw in 2023, but there are concerns that manufacturing businesses should pay attention to. The best way to describe the feeling you should go into the rest of 2024 is cautious optimism. The world is volatile, but the trend lines are good.
Next, we will provide our recommendations on how your business can best take advantage of these trends or hedge against the potential risks.
