Market Insight

Industrial automation equipment market to post slower growth in 2019

July 30, 2019

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The combined effects of a slowdown in the world economy, machinery production, and capital expenditure will depress growth this year in the global market for industrial automation equipment (IAE), shaving at least 1.5 percentage points of growth when the year ends compared to 2018 levels.

All told, global IAE revenue this year is projected to reach $218.3 billion, IHS Markit estimates. While growth is up 3.2% from 2018 levels, expansion is down from the much stronger 4.7% figure of a year earlier during the 2017-18 period.

These findings are contained in the recently released IHS Markit report, Industrial Automation Equipment Market Tracker Q1 2019, which examines major economic developments, including the impact of oil and commodity pricing on market demand for industrial equipment, while also identifying trends and drivers influencing the industry during the period.

In all, 52 different industrial automation equipment markets are tracked in the three categories of motors, generators, and motor controls; automation equipment; and power and transmission equipment.

Among the major regional IAE markets, China will continue to post the highest growth rate at 5.0%, followed by the Americas at 3.6%, as shown in the graphic below. 

Cooling seen in various indicators

Signs of softening could be seen during the period in various indicators pertinent to the global IAE market.

Given how the world economy was performing in the first quarter, real GDP growth, for instance, was projected to decline in 2019 compared to last year’s levels. This is true for the United States—where real GDP growth based on annual averages is projected to decelerate to 2.7%, down from 2.9% in 2018. Real GDP growth in 2019 will also contract in the Eurozone, China, and India.

Growth is likewise slowing in machinery production, another IAE market indicator.

The year started badly, with the Eurozone experiencing the steepest decline among world markets because of worsening conditions caused by slowing world trade and vehicle sales. Widespread worries were also present among manufacturers during that time on growing global trade protectionism, potentially higher tariffs, and unresolved questions relating to Brexit. 

In Asia, growth in machinery production was revised downward to less than 1% at the beginning of 2019 following China’s weak performance and headwinds in the shadow of a mounting trade war with the United States. Growth in China is forecast to decline further before the year is over, and as a result, manufacturing has been trending slowly away from China toward Vietnam, Indonesia, and Thailand. India remained a bright spot in Asia, with manufacturing operations there expected to strengthen over the course of 2019.

Machinery production was enjoying its strongest growth in the Americas. Despite major slowdowns in other parts of the world, first-quarter growth in the region was forecast to reach a solid 3.1%. Even so, IHS Markit has become less optimistic about prospects for most industries in the Americas from 2019 to 2021. Growth in manufacturing output is contracting overall, with businesses expected to scale back the accumulation of manufacturing plants and equipment, which would then slow capacity and sales alike.

Slower growth was also projected this year in industrial capital expenditure, another indicator of IAE market prospects. Representing the funds for maintaining, improving, or acquiring assets like buildings, land, machinery, and automation products, industrial capital expenditure in 2019 was expected to grow just 2.2% this year, down from 7.1% in 2018.

Capital expenditure is given a closer look in the report with a more detailed analysis of 11 major sectors, including automotive, cement and glass, chemicals, food and beverage, metal processing, oil and gas, pharmaceuticals, power, pulp and paper, refining and petrochemicals, and water and wastewater.

A 12th sector groups together four industries: mining, rubber and plastic, military and aerospace, and shipbuilding and maritime. The scale of automation used by these industries varies considerably.

More details on this subject can be found in the report, Industrial Automation Equipment Market Tracker Q1 2019. Additional information is available on the IHS Markit Manufacturing Technology research service page.  

Research by Market
Manufacturing Technology
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