When does the gear industry recover?


There is no question that the economic conditions throughout the world have changed radically since January — between the pandemic, government shutdowns, international trade wars, and tariff restrictions, the U.S. economy finds itself in the worst position since the Great Depression. However, that does not mean there aren’t positive signs that show the economic recovery is starting. But after looking at the data compiled in AGMA’s Gear Market Report — put together by world-renowned experts at IHS Markit — we are all bracing, because we know it will get worse before it gets a little better for our members.

According to the Gear Market Report, U.S. manufacturing saw zero growth during 2019, and it is expected to plunge 15 percent this year based on a number of issues that include: supply chain disruptions from China, COVID-19 safety issues in U.S. manufacturing facilities, and the “Pandemic Economic Hangover” — investment hesitation during a time of uncertainty leading to a decline in demand.

Let us dive in a little deeper to look at only a couple of the sectors that our gear manufacturers and suppliers sell to. As expected, The Gear Market Report numbers show declines in all 11 of the end-user markets covered for 2020, but some are direr than others.

Material Handling Equipment (elevator and moving stairways, conveyor and conveying equipment, overhead crane and hoists, industrial truck, tractor, trainer and stacker machinery, etc.): Goods consumption is expected to decline 5 percent in 2020, then increase 4 percent in both 2021 and 2022. Durable goods consumption should collapse 14 percent in 2020, then see growth of 9 percent in 2021 and 8 percent in 2022. 

Industrial Machinery (sawmill and woodworking machinery, food processing machinery, plastics and rubber industry, textile machinery, printing machinery, petroleum refining machinery, and more): Production is projected to decline 14 percent during 2020 then increase 2 percent in 2021 and 8 percent in 2022. Business confidence must be restored before investment in equipment takes hold. 

Agriculture Machinery (tractors, planters, food processing equipment, mowers and more): Farm equipment production is likely to decline only 4 percent during 2020 as farmers’ incomes are hit minimally compared to the rest of the economy.

Construction Machinery (backhoes, bulldozers, off-highway trucks, construction tractors, road graders, logging equipment and more): A $45.5 billion industry, demand was up 9 percent in 2019, much of it supplied by imports. In early 2020, demand turned sharply negative, minus 13 percent. Total construction should be weak over the next three years, especially if there is no further discussion of an infrastructure stimulus.

Aerospace (aircraft manufacturing, aircraft-engine and engine-parts manufacturing, and more): The whole aerospace industry from production to service is likely to take years to recover. We now feel we may have been too optimistic on original expectations. Boeing just announced it is laying off 7,000 workers, and, with air carriers in distress, canceled orders are now a major worry. So far, 150 737 Max orders have been cancelled.

Oil and Gas Field Machinery (oil and gas field equipment, derricks, water well drilling machinery, and more): Exports represent more than 30 percent of shipments, and they collapsed during early 2020. Average oil prices are expected to decline by 45 percent during 2020. Bankruptcies in oil drilling may be widespread.

The Gear Market Report covers more than 10 different sectors and is the type of tool all manufacturing companies and their suppliers can rely on to provide the latest economic data affecting their businesses. The IHS Markit economists use AGMA’s Monthly Market Trend data, which aggregates company shipment and booking data to specifically forecast the gear industry as accurately as possible. With the report coming out every quarter, the data is consistently updated, which takes the guess work out of why you need to shift your strategic plan. After all, in the 100 years many of our members have been in business, it is the understanding of the long game that is critical.

“Manufacturing is several degrees removed from the consumer and is appreciably less sensitive to small dips in the economy … Manufacturers should smooth forecasts into moving averages. They should not react to small, short-term changes. Instead, they must focus on underlying trends — they must understand their position in the business cycle, and they must separate key indicators from those that impact more changeable industries,” according to the Forbes article, “Three Keys For U.S. Manufacturers To Build Accurate Forecasts.”

The good news story? The forecasts do show the inevitable recovery, but it just might take more time than we would like.

“The full thrust of the recovery for gears will likely be felt in 2022 when end-markets have shaken off the effects of the pandemic. However, it will likely take more time for business to return to pre-pandemic levels,” according to the Q2 Gear Market Report. 

For now, it is imperative that manufacturers and suppliers use AGMA and its resources to stay ahead of the numbers. There is a reason many of our members have been around for more than a century, and using reports like the Gear Market Report can provide the insight you need to be around for a long time.

For more information regarding the Gear Market Report or questions on how to sign up, email doran@agma.org.

Upcoming Webinars

National Security Reviews of Foreign Investments in the United States: What U.S. Companies and Overseas Investors in the Bearing, Gear, and Related Industries Need to Know

August 5, 2020 | 1-2 p.m. EST | Free

Under legislation passed by Congress in 2018 and implemented in February 2020, the U.S. government’s Committee on Foreign Investment in the United States is increasingly scrutinizing a wide range of investments by foreign persons — most notably from China — in U.S. businesses, infrastructure, and real estate. Companies and investors in the bearing and gear industries are among those likely to be most affected by the new CFIUS rules and may see their planned investments blocked or penalties levied where the requisite CFIUS review is not performed. This webinar will pull back the curtain on the new CFIUS process and tell you what you need to know to identify CFIUS issues and successfully complete planned investments.

Huawei or the Highway: How New U.S. National Security Laws Aimed at China will Impact Emerging Technologies and IoT Initiatives in the Bearing and Gear Industries.

September 2, 2020 1-2 p.m. EST | Free

Behind the headlines about a Chinese company, Huawei’s alleged violations of U.S. export control and sanctions laws are a range of U.S. government initiatives designed to address concerns over Chinese technological and market dominance of emerging technologies such as 5G and “Internet of Things” (IoT). The Trump Administration has been taking a whole of government approach to these issues, engaging in new rulemaking and working closely with Congress and independent agencies such as the Federal Communications Commission to craft a set of rules that will shape the direction of investment in these technologies for years to come. This webinar will explore these issues and highlight the many pitfalls and opportunities for bearing and gear companies that rely on these technologies or plan to make them part of new projects and products.

Options and Approaches to Addressing the Continuing Problem of Counterfeit Imports: U.S. Government Initiatives and Next Steps for Industry to Consider

October 7, 2020 | 1-2 p.m. EST | Free

Imports of counterfeit bearing and gear products continue to present challenges for our industries, raising real safety risks, undercutting consumer confidence, and harming the bottom line. This webinar will examine a range of new initiatives designed to stem the flow of counterfeit products into this country and provide practical advice on how to fight back and enlist U.S. government resources in that fight.

NFPA’s 2020 Industry & Economic Outlook Conference

August 11-13, 2020 | 9 a.m.-12:30 p.m. CST | Virtual Delivery

The Industry & Economic Outlook Conference (IEOC) is NFPA’s premier economic event that offers hard data and expert analysis for everyone in the fluid power supply chain. Both members and non-members alike are able to attend. Taking place in a series of three half-day sessions, the 2020 IEOC will offer the same exclusive economic content NFPA members have come to expect as well as exclusive opportunities to network with speakers and other attendees.

For more information, please visit: nfpahub.com/events/conferences/the-ieoc

Online Gear Education from the Basics to the Engineering

AGMA offers video training and an online workforce training series for members and non-members. These courses are a convenient way to keep your employees learning from the computer. Visit: www.agma.org/education/online/video-training/detailed-gear-design-beyond-simple-service-factors/ to see the course descriptions.

Ongoing Recorded Virtual Training

  • Detailed Gear Design – Beyond Simple Factors.
  • Gear Failure Analysis.
  • Gearbox CSI: Gears Only.
  • Online Workforce Training: Parallel Gear Inspection.
  • Online Workforce Training: Hobbing.
  • Online Workforce Training: Fundamentals of Gearing.

The AGMA Fall Technical Meeting is Going Virtual!

For 2020, AGMA has decided to make the FTM an online event so people all over the world can experience the quality presentations from the gearing experts without having to travel. FTM Virtual will be in October and will consist of 10 pre-recorded presentations and one live Q&A session with the speakers. More details will be coming out soon, so make sure to check in at www.agma.org/2020-fall-technical-meeting/

Calendar of Events

July 15 — Aerospace Committee Meeting — WebEx

July 16 — Lubrication Committee Meeting — WebEx

July 17 — Sound and Vibration Committee Meeting — WebEx

July 23 — Nomenclature Committee Meeting — WebEx

July 30 — Metallurgy and Materials Committee Meeting — WebEx

August 5 — National Security Reviews of Foreign Investments Webinar — www.agma.org/education/online (free)

August 12 — Powder Metallurgy Committee Meeting — WebEx

August 13 — Metallurgy and Materials Committee Meeting — WebEx

August 18 — Plastics Committee Meeting — WebEx

August 18–19 — AGMA Board of Directors Meeting — Alexandria, Virginia

August 20–21 — TDEC Meeting — Alexandria, Virginia

August 25 — Gear Accuracy Committee — WebEx

August 26 — Lubrication Committee Meeting — WebEx

August 27 — Bevel Gearing Committee Meeting — WebEx