American manufacturers and supply chains set to ramp up in 2024, while other regions continue to struggle
Business confidence measures suggest that North America will be one of the top performers heading into 2024 in manufacturing and the supply chain sector, but weakness in Asia-Pacific and Europe will continue
Business confidence measures from GEP and the Institute for Supply Management (ISM) indicate that recovery from recent global manufacturing and supply chain sector weakness is going to be strongest in North America in 2024, while Asia-Pacific and Europe will continue to struggle with overcapacity.
According to the GEP Supply Chain Volatility Index, which measures supply chain capacity via a survey of 27,000 respondents, the December figures showed that North America was not only the region with the highest overall score, but that its score had risen to its highest level since April 2023. Although the figure of -0.21 recorded still suggests overcapacity within supply chains, it is far above the -0.85 recorded in Europe and better than the -0.38 in Asia, with the report authors noting that the latter region still had “one of the greatest degrees of vendor spare capacity in the post-pandemic era.”
Similarly, the ISM measure forecasts that the US manufacturing sector has now bottomed out and will improve throughout 2024, particularly in the second half of the year.
Their survey of US manufacturers found that 58% anticipate rising year-on-year revenues, with expectations of a 5.6% net increase in overall revenues for 2024, compared to 0.9% in 2023. That improved demand picture is why executives expect production capacity to expand 7.8% this year, compared to a just 0.7% rise in 2023.
“Manufacturing grew for 28 consecutive months from June 2020 through September 2022,” said Timothy R. Fiore, CPSM, C.P.M, Chair of the ISM Manufacturing Business Survey, but this was followed by a period of continued contraction “until now”. However, looking forward, “manufacturers also predict growth in both exports and imports in 2024," he commented.
One of the main beneficiaries of this turnaround in US manufacturing will be the US West Coast ports. Prologis predicted in its predictions for this year that freight volumes will exceed their pre-pandemic levels at Los Angeles and Long Beach.
The real estate company noted that these ports already moved 46% more import goods to close the 2023 compared to February 2023, although a large part of this is also down to these ports improving attractiveness due to supply chain conditions. Capacity was boosted by formalised contract negotiations with unions and reduced ship transits in the Panama Canal, which has made East Coast ports a less appealing proposition for importers.