Question

Business and financial analysts often provide trends for their industry. Find a trend (doubt, prediction, warning) in the manufacturing industry. Speculate how the analyst derived the trend?

Answer 1

A trend in the manufacturing industry by business and financial analysts is in the form of prediction. The trend (prediction) is that, in the future, the manufacturing industry will start taking advantage of digitization to optimize their processes. For this purpose companies in the manufacturing sector and capital goods sector will introduce new operating models and make substantial targeted investments.

On a global scale the demand for manufactured products is growing at a flat rate. The growth environment is slow due to several reasons like low levels of foreign trade, uncertainty involving Brexit, undermining of free flow of goods by nationalist governments etc.

Keeping this in mind the future outlook for the manufacturing industry is not very bright and hence to survive in the tough environment companies in this industry will largely focus on productivity gains. This focus will make companies more deliberate with regards to their investments and hence the level of capital expenditure will remain subdued in the future.

Analysts derived the trend by studying the macro and micro economic scenarios. Historical data was used to project trends. Business analysts must have used data sets like historical revenue growth in manufacturing industry, correlation with GDP growth, capital expenditure data and its correlation with industry growth. These data sets must have been combined with qualitative analysis like shape of trade policies in future and future geo-political developments.