More competition. Hiring issues. Retention issues. Rapidly changing technology. Capital investment plans. The need to future-proof for the next economic cycle.
These were just some of the many topics of conversation at FABTECH 2018 in Atlanta.
Nearly a year has passed since then, and some of the predicted trends and challenges have come to fruition, while new ones have arisen—especially in light of tariff changes, particularly in mid-2019.
Despite the various challenges the metal fabrication industry has experienced this year, several positive anticipated trends are expected to lead to industry growth throughout the rest of the year.
Here are three reasons why the metal fabrication industry grew in 2019.
1) Increase in aggregate private investment
Analysts predict that aggregate private investment in capital goods (e.g., buildings, machinery, and vehicles) will increase throughout 2019, leading to growth in the machine shop services industry particularly.
Thus far, their predictions have proved to be correct. In Q1 of 2019, the total value nonresidential of fixed investment (gross private domestic investment) in billions of dollars was $2,882.7B—an increase of $42B from the Q4 of 2018 value of $2,840.7B.
The nonresidential fixed investment increased in Q2 of 2019 by $7.3B to $2,890.0B.
The total equipment value in billions of dollars (including information processing equipment, industrial equipment, transportation equipment, and “other” equipment) increased as well in Q1 and Q2 of 2019.
It reached $1,249.0B in Q1 (an increase of $2.6M from the Q4 of 2018 value of $1,246.4) and then increased by $3.9B to $1,252.9 in Q2 of 2019
2) Increased federal funding for defense
Machine shops will also benefit from an anticipated increase in federal funding for defense since much of their work comes from aerospace manufacturers who make parts for the military.
Federal funding for defense is expected to increase this year to $956.50B, helping bolster machine shop services growth.
3) Increased government funding for highways
Government funding for highways and other transportation infrastructure is anticipated to increase throughout 2019, which could prove to be an opportunity for structural metal product manufacturing companies since this is one of this industry’s main markets.
According to an IBISWorld research report on road and highway construction in the U.S., federal funding for transportation is predicted to increase as follows over the next few years:
This is an excerpt from COACT’s original research report on the state of the metal fabrication industry in 2020. Fill out the form below to get your copy!