United States / Analyst Insights
Pinpointing US Manufacturing’s 2019 Decline

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by Nick Masters, Lead Industry Research Analyst
Dec 18 2019

The Manufacturing sector (IBISWorld report 31-33) is estimated to have declined in 2019 as a result of several macroeconomic hurdles and falling downstream demand. Continued strength in the US dollar, slowing global market growth and a trade war with China have been the macro-level sources of the sector’s troubles. However, a more-granular examination of the sector tells a deeper story. Using IBISWorld’s Industry Wizard tool, we sorted through 193 core manufacturing industries and have outlined three of the hardest-hit subsectors in 2019.


Primary Metals subsector (NAICS 331)

The Primary Metals subsector is largely defined by the Iron & Steel Manufacturing (IBISWorld report 33111) and Aluminum Manufacturing (33131) industries; which account for an estimated 39.4% and 16.4% of total subsector output in 2019, respectively. Out of the subsector’s nine industries, these two industries have also exhibited the steepest declines in output in 2019. The Iron & Steel Manufacturing industry is expected to decline 13.7% in 2019, while the Aluminum Manufacturing industry is forecast to decline 7.0% by year-end.

A mix of oversupply and slowing global industrial output have caused severe declines in metal prices. IBISWorld forecasts the world price of steel will decline 18.8% in 2019, while the world price of aluminum is expected to fall 8.8% from 2018 levels. This has crippled average selling prices for raw materials, and thus revenue for the Primary Metals subsector.



Machinery Manufacturing subsector (NAICS 333)

In the Machinery Manufacturing subsector, the Tractors & Agricultural Machinery Manufacturing (33311) and Mining, Oil & Gas Machinery Manufacturing (33313) industries are expected to contract most significantly. The two industries are estimated to account for a respective 9.1% and 4.9% of total subsector output in 2019.

Exacerbating the Tractors & Agricultural Machinery Manufacturing industry’s woes is the current decline of the Agriculture, Forestry, Fishing & Hunting sector (IBISWorld report 11). The sector has been the hardest hit by retaliatory Chinese tariffs on key US exports such as soybeans and corn. Additionally, adverse weather conditions, particularly in the Midwest’s “Corn Belt,” have resulted in low crop yields, further hastening the sector’s decline. In turn, agricultural producers are either delaying or reducing purchases of tractors and agricultural machinery, causing the industry’s 2.0% decline in 2019.

Additionally, the Mining, Oil & Gas Machinery Manufacturing industry is expected to decline 4.3% in 2019 alone. This is due to declining crude oil prices and concurrent reduction in US mining activity . The world price of crude oil is forecast to decline 9.6% in 2019 according to IBISWorld estimates, largely due to slowing global economic growth and continued uncertainty surrounding the US-China trade war.



Motor Vehicles & Parts subsector (NAICS 3361-3)

The subsector’s largest industry, SUV & Light Truck Manufacturing (33611b), is expected to contract 1.0% in 2019 as light truck production continues to slow. The number of trucks manufactured in October fell to 6.9 million units, according to Federal Research System data, marking the fourth straight monthly decline in truck production.

Although influenced by recent union strikes, SUV and light truck production has declined over the past three quarters as a result of lackluster new car sales. Moreover, the Auto Parts Manufacturing industry (33639), which accounts for an estimated 10.1% of total subsector output, is projected to decline 3.3% in 2019 alone. Weakened demand from downstream auto manufacturers, in addition to growing import penetration, has contributed to the industry’s decline.



Overall, the greater Manufacturing sector’s decline can be pinpointed to certain industries that are highly sensitive to commodity prices, weather and consumer sentiment. However, these drivers change more frequently than the sector’s underlying macroeconomic drivers, and thus point to how fast certain trends can run their course within the industry. Moving forward, a continuation of a low interest rate environment coupled with an anticipated weakening of the US dollar are expected to lift the sector back into growth territory.


Looking for related industry coverage on the US Manufacturing sector? Discover our recent Industry Insider article on 2019’s Top 5 Highly Concentrated Manufacturing Industries!



Edited by Sean Egan

Infographic Design by Vicky Wolak