In 2024, U.S. manufacturing experienced continued investment even as higher interest rates and a challenging business environment have created obstacles to near-term industry growth. Deloitte’s analysis of S&P Global data reveals that while 2024 began with the manufacturing purchasing managers’ index (PMI) moving into expansion for the first time since April 2023, which continued for the first half of the year, weaker demand nudged the PMI back into contraction in July 2024. In addition, the November 2024 PMI report identified an ongoing combination of falling orders and rising customer inventories, which could signal the need for manufacturers to further cut production in the coming months. While the rate of inflation has diminished, manufacturers continue to face higher costs: The producer price index for input materials and components seems to have stabilized but remains high, while total compensation, which includes wages and benefits, has continued its upward climb.
Deloitte’s 2025 Manufacturing Industry Outlook explores the following trends to help leaders shape strategies and priorities in the coming year:
- Talent
- AI and genAI
- Supply chain disruptions and efficiency
- Smart optimization
- Clean technology manufacturing
Key Takeaways:
- Looking ahead to 2025, manufacturers are expected to continue to face a challenging and uncertain business climate due to a combination of higher costs, potential policy changes following the U.S. and global elections, and geopolitical uncertainty. Surveyed manufacturers in NAM’s 2024 third-quarter outlook expect raw material and other input costs to grow by 2.7% over the next 12 months.
- However, lower interest rates have the potential to fuel investment and business and consumer spending, which could spark higher demand for manufactured goods. On the other hand, while the Federal Reserve has expressed confidence that it can achieve a “soft landing,” there is still a risk that the recent cooling in the labor market could accelerate, potentially leading to an economic slowdown. For instance, consumer spending has remained relatively robust through September 2024, but this could slow in 2025 if unemployment accelerates, which might affect the manufacturing industry.
- Potential policy changes after the 2024 US elections, as well as elections across the globe, may have impacts on supply chains, demand, and long-term investment in manufacturing. Changes to trade policy and tariffs could drive up raw material and component costs and could have ripple effects throughout the supply chain. Potential adjustments to parts of the Inflation Reduction Act could impact investment in certain aspects of clean technology manufacturing in the United States.
