Manufacturing Investment: A Key to Growth

After two years of riding the choppy waves of the global pandemic, the overall strength of the U.S. manufacturing sector has opportunities for growth. The key will be whether manufacturing leaders take advantage of inexpensive money to invest in people, processes and growth.

That’s the view offered by economist Alan Beaulieu, president of ITR Economics, at the 2021 National Fluid Power Association’s Industry and Economic Outlook Conference Aug. 17 in suburban Chicago. More than 200 fluid power industry leaders attended the event in person, a positive sign for the industry as a whole.

Beaulieu said industrial output remained strong despite the challenges of the pandemic and an inflation blip, and he was bullish on the near-term growth potential for the sector.

“Industrial production is on the rise. Manufacturing in this country is kicking it,” Beaulieu said. “Manufacturing continues strong; it’s just a question of degrees.”

Economist Alan Beaulieu speaks at the National Fluid Power Association’s annual Industry and Economic Outlook Conference

Beaulieu noted the generational perception of inflation, reminding attendees that interest rates were in the mid-teens in the 1980s “and you survived. What we’ve gone through has made us agile, what we’ve gone through has made us change.”

He advised manufacturers to take advantage of low interest rates before the inevitable rise of those rates, which Beaulieu predicted may be on the horizon in the next two years. He suggested three ways to invest:

  • Making business acquisitions.
  • Investing in products and innovation.
  • Invest in processes to drive efficiency gains and smooth out supply chains.

The supply chain issues that have restrained growth in some sectors are expected to ease in the coming months. That will create some easing of inflation and a more typical set of business conditions. “Expect slower demand in 2022,” Beaulieu said. “I think you’re going to like 2022 a lot. It’s going to be a more measured business that you’re going to recognize.”

There are some headwinds, including labour and the emphasis of climate change on the jobs market. “Some jobs will be destroyed and others will be created,” he said. “You will have to be agile; you will have to change.”

The efforts to drive more apprenticeships and workforce programs in community colleges and programs such as the NFPA Education and Technology Foundation won’t completely solve the labour issue. “Labour is going to be an issue for years to come,” he said. “All the things you’re doing is important, but it’s not going to go away.”

Beaulieu gave high marks to the recent infrastructure bill passed in Congress. “We are in desperate need of infrastructure spending,” he said. “I’m a big fan of spending money of infrastructure. It’s going to be good for certain segments of the economy.”

Source: Hydraulics & Pneumatics

FPN Industry News

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