While industrial production surged in December, fueled by a rebound in aircraft manufacturing, the overall manufacturing sector experienced a relatively quiet year in 2024, with high interest rates and economic uncertainty dampening capital expenditure demand. Optimism for 2025 remains tempered by ongoing tariff concerns and a wait-and-see approach among businesses.
Industrial production increased by 0.9% in December, marking the fastest monthly growth since February. This surge, however, may overstate the sector's current health, as the gain was largely driven by a rebound in aircraft production following the end of a strike at Boeing. The year 2024 proved to be relatively uneventful for manufacturing, with high interest rates, economic uncertainty, and reduced capital expenditure demand impacting overall activity.
While December's figure showed strength across all major components – mining output rose 1.8%, utilities production jumped 2.1% due to increased natural gas production, and manufacturing output climbed 0.6% – the overall manufacturing index remained stagnant, ending the year at 99.3, the same level as 2023.Despite the lackluster performance, some sectors demonstrated resilience. High-tech industries like computer and electronic products and electrical equipment & appliances experienced notable growth. The large chemical industry also bucked the trend, with production increasing by 5.4% over the past year. However, most industries faced flat to declining growth in 2024, as businesses held back on capital expenditures due to a combination of factors: reduced liquidity, high interest rates, and persistent uncertainty.A key trend observed in 2024 was the divergence between business and consumer goods output. While consumer goods production remained relatively strong, business investment slowed considerably. This divergence is indicative of the current economic landscape, where businesses are hesitant to invest despite ongoing consumer resilience. Small business sentiment has improved following the election, fueled by optimism regarding deregulation and tax policies. However, tariffs remain a major concern, adding uncertainty to the outlook. The lack of clarity surrounding future tariff policies continues to keep many businesses on hold when it comes to making new capital expenditure decisions. This cautious approach is reflected not only in the economic data but also in recent ISM manufacturing surveys and conversations with clients. The extent to which demand conditions improve in 2025 remains to be seen
INDUSTRIAL PRODUCTION MANUFACTURING ECONOMIC GROWTH CAPITAL EXPENDITURE TARIFFS
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