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Manufacturing Economic Update September 2023

Guest post by: Leland Smith

What Should Manufacturers Like Me Do About The Economy?


The Dayton Region Manufacturers Association (DRMA) held its annual Economic Outlook with Connor Lokar of ITR Economics in September 2023.  The event looked at the economy today and beyond focusing on Ohio manufacturers.  Below are key takeaways from ITR.  Italics indicate additional comments from Grow MFG.  ITR’s forecast last year was remarkably close to what happened so far in 2023.

Executive Summary:

  1. It is unlikely the Fed will create a soft landing.  It is forecast that 2023 will continue to soften, 2024 will experience a mild recession, and 2025 will recover to previous growth levels.  2024 is expected to be survivable and will be the time to get in front of the return in 2025 and 2026.  See section 7 below to see what to do now and in 2024.
  2. US Industrial Production continues to slow and is forecast to be negative in 2024. However, by the end of 2024 the US Industrial Production is forecast to be at bottom of the mild recession and at the beginning of a growth phase.  Note: Manufacturers should use Industrial Production instead of GDP to understand their markets as Industrial Production is not necessarily moving in the same direction as GDP.
  3. Inflation appears to be the driving force behind this forecast. Inflation was at historically high levels, is coming down, and is expected to end 2023 around 3%.  It should bottom out in 2024 and be in the 3-4% range in 2025.  Specifically:
  4. Supply chain pressure (and pricing) should diminish through 2024 barring any additional disruption.
    1. A tight labor market combined with inflationary pressure felt by employees caused wage rates to rise. Wage rate pressure is expected to fall off as the market slows, inflationary pressure felt by employees declines, and the labor market becomes less tight.
    2. In its efforts to fight inflation, the Federal Reserve aggressively raised interest rates to the point that it now appears it will result in a “hard landing”/mild recession.
  5. Despite a mild recession, some sectors are expected to perform well and others less well.
    1. Next year should be a good year to buy a car as it is expected there will be a lot of inventory.
    2. Big construction machinery equipment and megaprojects should continue to do well because of the Inflation Reduction Act. Aviation should do well. Single family homes are also starting to recover.
  6. By 2025 and 2026, Industrial Production will bounce back. 2025 will be a good opportunity for organic growth.
  7. What manufacturers can expect in 2024:
    1. It will be more competitive.
    2. Expect to eat into your backlog and expect sales cycles to lengthen.
    3. Employees will be less likely to jump ship and less likely to demand wage increases.
    4. Onshoring should continue to make supply chains more secure.
  8. What manufacturers can do now and in 2024:
    1. Don’t panic! ITR’s advice for the mild recession did not suggest aggressively watching cash flow, laying off employees, securing financing, evaluating vendors for financial strength, etc. This is expected to be a mild, survivable recession.
    2. “Invest in your business”. 2024 is the time to get in front of the 2025 upswing.
      1. Make sure to keep your A, B, and C players (but don’t worry so much about the D, E, and Z players you hired because of labor market constraints)
      2. Take advantage of the mild, survivable recession:
        1. What do you wish you did before the last recession? What did you regret?
        2. What have you said ‘no’ to for the last 24-36 months because you did not have the bandwidth? You will have bandwidth in 2024 to prepare for growth in 2025.
        3. Develop a plan and execute the plan to manage the recession and prepare for 2025. If you need help developing and executing the plan, contact Grow MFG.
      3. “Market share gains are key to riding out the downturn”.
        1. Add leads and new customers to keep sales up. If this isn’t easy for you, learn more about outsourcing lead generation by calling Grow MFG.
        2. Not sure what to do to gain market share or don’t have the bench strength to gain market share? Talk to Grow MFG about a sales and marketing gap analysis and recommendations report.  Our work is guaranteed!
      4. Many businesses are developing next year’s annual strategic plans now and using these economic forecasts to do so. If you need help developing your annual strategic plan, call Grow MFG.

Hope these notes are helpful.  

Good luck with the rest of the year and in 2024!



Leland Smith

President, Grow MF7