Recession in 2020? Manufacturers Seem to Think So, Data Shows
Date: Friday, January 24, 2020
Source: Sourcing Journal
A new survey by AI-driven strategic sourcing and procurement company LevaData found that as many as 70 percent of manufacturers think an ongoing trade war will likely lead to a global recession this year.
And 42 percent pegged the trade restrictions brought about by the battle between the U.S. and China as the issue that will have the greatest impact on their business this year. After that, geopolitical instability ranks a distant second, with 15 percent calling it their biggest concern, followed by 12 percent pointing to natural disasters and 11 percent who are worried about impeachment related uncertainty.
The general instability and potentially impending recession won’t be the least of the concerns for supply chains, either. Forty-eight percent of manufacturers surveyed expect to pay more for goods and services this year, and 47 percent think they’ll be dishing out more dollars for inputs and labor.
“The vast majority (89 percent) of the executives surveyed agree that tariffs will increase production costs,” LevaData said. “Most estimate this increase at 10-20 percent over the course of the year. More than two-thirds expect both their production costs (71 percent) and material costs (67 percent) to increase.”
As such, 79 percent of manufacturers said they’ll be increasing prices for their goods and services. Consumers already sensitive to price andy may not be receptive to a full pass-on of the increased costs, so some companies are also looking for savings within the company, reducing profit margins and renegotiating raw material supply deals.
Recession, rising prices and risking margins aside, manufacturers seem to think the trade war will prove positive over the long term.
“Broadly speaking, only 22 percent of manufacturing executives don’t support the newly imposed tariffs. Nearly a third (32 percent) actively support them, and 46 percent are neutral,” LevaData said.
What’s more, 65 percent think the tariffs will yield improved global trade practices, 40 percent foresee improved U.S.-China trade relations in the next few years, and 37 percent think supply chain operations will run more smoothly in the long term.
“Nearly half (47 percent) believe tariffs will ultimately lead to economic growth in the U.S.,” LevaData noted. “However, an almost equal number (46 percent) believe they will lead to economic decline.”