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New World Economics U.S. Manufacturing Forecast

The tumultuous US-China trade war pushed the US manufacturing sector into a modest downturn during 2019. Just as signs of stabilization were appearing, a global health crisis all but shut down the US and global economies. 

As a consequence of being the most globalized sector, manufacturing was the first sector of the US economy to feel the effect of the coronavirus outbreak. In December 2019 through February of this year, while other sectors were just watching the emerging health crisis in China, US manufacturers were burdened by significant supply chain disruptions which have continued to grow. The percent of respondents to the ISM manufacturing survey who reported slower supplier deliveries rose from 16.8 percent in January of this year to 55.8 percent in April.

US manufacturing output contracted by 5.5 percent in March and by a record 13.7 percent in April as U.S. and global demand for U.S. manufactured goods plummeted and as the pandemic shutdown factories in a number of key subsectors. By contrast, the worst single-month contraction in US manufacturing output during the financial crisis of 2007-2009 was 3.5 percent. 

New World Economics is forecasting a 22 percent contraction in US manufacturing output for calendar year 2020 followed by a partial rebound of 12 percent in 2021. There are a range of uncertainties in the rebound projection. First and foremost is the status of the outbreak: When will the virus be contained enough to allow for full resumption of normal economic activity?

The longer the U.S. and global recovery is delayed, the weaker it is likely to be. The strength and breadth of global recovery will matter a great deal to the U.S. manufacturing outlook as will recovery from the dramatic plunge in oil prices. The energy sector has grown in importance for domestic U.S. manufacturing and the oil price slide is yet another layer of pain for America’s factory sector.

The world is confronting the most uncertain economic climate in a century. As dictated by changing circumstances and new data, New World Economics will be updating and revising its forecast of US manufacturing growth. 

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