Manufacturing is critically important to both the developing and advanced world. In developing countries, it provides a bridge between subsistence agriculture and rising incomes. In economically forward nations, it contributes to research and development (R&D), exports, and increased productivity.
Importance of the Manufacturing Sector
Economic growth depends on manufacturing. When there is larger output and sectoral growth in manufacturing, the aggregate growth rate increases proportionately. A world in which all regions have a strong manufacturing base would go far to eliminate poverty and war.
Manufactured goods are necessary for trade. Although about two-thirds of most economies are composed of service industries, they are also dependent on manufactured goods.
Manufacturing creates middle-class jobs that anchor the economy. It also supports other jobs because the wages from manufacturing employees are re-spent in other parts of the economy. For example, for every $1.00 spent in manufacturing in the United States, another $1.89 is added to the economy, which is the highest multiplier effect of any economic sector.
Industrializing economies now account for a growing share of the world’s manufacturing value as there has been a slow shift of production from industrialized to industrializing countries. Outsourcing not only provides manufacturers with cheaper labor, better infrastructure and lesser social costs but also helps the growth of domestic markets in developing countries.
Technological advances are almost always made for factory machinery. Also, machines make other machines, which is called exponential growth. Industrial machinery is used to generate national wealth and also to produce military equipment.
Is Global Manufacturing Faring Well?
The global manufacturing sector remains healthy. World manufacturing output maintained a 4.2% growth rate in the first quarter of 2018 because of the improved conditions in industrialized economies in 2016-2017.
In February, the top 20 markets for US-manufactured goods expanded, indicating the strength of the international economy. The J.P. Morgan Global Manufacturing PMI slumped to 53.4 in March 2018, which is the lowest since October 2017. Similarly, the IHS Markit Eurozone Manufacturing PMI fell from 60.6 in December 2017 to 58.6 in February 2018.
The interim outlook of the Organization for Economic Co-operation and Development (OECD) indicates stronger growth, with global GDP projected to rise up to 4% in 2018 and 2019. Manufacturing leaders also seem hopeful about their global outlook.
New Technology in Manufacturing
Manufacturing is going through significant changes. Rapid technological development allows manufacturers to work smarter, operate more efficiently, and create unique products. It helps them to assemble, create and produce high-quality products.
Also, more companies are now able to sell directly to consumers online. This means companies spend less in distribution costs, and their customers don’t waste time and money. Customer service is also much more efficient.
Although productivity increases, many people lose jobs because automation and technology allow factories to produce more with fewer people. However, technology creates more jobs than it eliminates, albeit with new skill sets.
Companies will have to hire people who are comfortable with technology or train existing workers to fit these new jobs. The manufacturing sector will have a smaller, differently skilled workforce. The jobs in the sector will also be safer because people may no longer have to deal with dangerous jobs; machines may deal with those.
The Global Manufacturing Competitiveness Index (GMCI) study found that nations who invest in new technologies will be more successful than those who compete on price. Governments and businesses should focus on education, skill development, R&D, data analytics, and product design. They should ensure that education equips people with computer skills, math, analytical skills, and the maturity to deal with others, regardless of their race, gender, economic status or personal preferences.
Policy makers should support manufacturing industries and help them access emerging markets. Long-term goals for growth, innovation, and exports depend on the well-being of the manufacturing sector.