The recession hit downstream sectors hard, but the industry's markets have stabilized.
Los Angeles, CA (PRWEB) September 29, 2012
Growth for the Machine Shop Services industry was healthy during the early part of the past five years, fueled by the strong performance of heavy-machinery manufacturers. Traditional major clients, such as automobile and machinery manufacturing, had been growing in step with market demand. Meanwhile, demand increased from government spending in sectors like defense, which also contributed to industry growth. As the initial signs of the recession began to appear, many of these markets began to temper, some more so than others. By 2008, says IBISWorld industry analyst Antonio Danova, “underperforming downstream industries outweighed more resilient segments, and industry revenue grew only marginally as a result.” The economic downturn hit sectors like commercial aviation and automotive manufacturing particularly hard, but conditions in these markets stabilized and improved toward the end of 2010 and throughout 2011. Because of the steep drop in revenue in 2009, though, IBISWorld expects industry revenue to decline at an annualized rate of 1.3% from 2007 to 2012. Demand for machine shop services will likely increase throughout 2012, with revenue expected to grow 2.3% for the year and total $37.8 billion.
According to Danova, because client industries have become more focused on service price than in the past, “machine shops have been forced to lower costs in order to maintain competitive pricing.” As demand for services has fallen, machine shops have reduced their workforce. Many of these reductions occurred in 2008 and 2009, and employment in the Machine Shop Services industry is expected to fall at an average rate of 3.1% per year over the past five years to total 226,020 in 2012. Firms unable to lower costs effectively were forced to close, and enterprise numbers are expected to decline an average of 0.4% per year to total about 20,000 during the same period.
Through 2017, manufacturing growth will resume, thereby boosting industry revenue. IBISWorld forecasts revenue to increase slowly over the next five years. Industry demand is projected to continue to improve through 2017 as automakers find uninterrupted growth throughout the five-year period. Continuous improvements in credit availability and disposable income will encourage consumers to sustain interest in purchasing new vehicles. These trends will result in rising demand for machine work from the automotive industry. However, as costs rise, clients will look to import completed components to save money, moderating growth for domestic machine shops. For more information, visit IBISWorld’s Machine Shop Services in the US industry report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld industry Report Key Topics
In general, machining describes a collection of material-working processes that involve powered tools such as lathes, milling machines and drill presses to shape materials. Machining is involved in almost all forms of metal product fabrication, though machining may involve materials other than metal.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.