Manufacturing And The Looming Recession (Part 1 of 2)
Randy Wolken, President & CEO
It’s becoming more likely that we will experience a recession. High inflation, increasing energy prices, and weaknesses in our economic growth all point to a downturn in the near term. The Federal Reserve has begun to take actions to raise rates to help moderate our economy in the hopes of reigning in the high inflation rates we’ve been seeing. What will this mean for manufacturers and businesses?
The recovery from the early years of the pandemic has been quick and encouraging. Businesses started to grow again as we returned to a new form of normalcy. However, the impacts of a multitude of factors have made it more likely than not that we will see at least a limited downturn in our economy. What we do now as a nation and within New York State will set the stage for how deep our recession is and how quickly we recover.
First, a little history concerning the impact of recessions on manufacturing is helpful. Manufacturers have generally seen more severe effects from a recession than the overall economy in terms of GDP and profits. However, they have also seen faster recoveries compared to the overall economy.
Typically, manufacturers must make adjustments to navigate through recessions. They often do this by reducing unprofitable parts of their business, optimizing operations, and investing in areas that remain stable or grow during downturns. Manufacturers have traditionally grown productivity through better use of their talent and equipment. This is demonstrated by significant gains in productivity despite flat capacity utilization coming through and then out of a recession. Recessions are common components of our global economy, and manufacturers must adjust to remain successful.
In my experience, well-led manufacturers who prepare their teams for recessions do much better and emerge more quickly from these downturns. Moreover, they can increase customer loyalty and secure greater market share and profitability. We at MACNY stand ready to help our members do just that. In my message next week, I will write about steps manufacturers and businesses can take to limit the recessionary impact of a downturn and navigate to a better future.