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Analysis of U.S. manufacturing sector warns of pitfalls, declines
- June 27, 2017
- News Release
- Shop Management
Creditsafe USA, Allentown, Pa., has released the findings of an in-depth analysis of the U.S. manufacturing industry. Despite recent overall consistent performance, the study highlights several areas of concern across the entire sector—in particular the rate of bankruptcy, signaling the possibility of an industry slowdown. With the manufacturing industry being the largest area of employment in the U.S., any decline could have a catastrophic effect on the overall U.S. economy.
"The Creditsafe Guide: US Manufacturing—Globalization, Automation and Robotization" looks at the overall credit risk for U.S. companies within the manufacturing sector. According to data from the Bureau of Economic Analysis, the manufacturing sector is the largest in the U.S. with approximately 600,000 actively traded companies. Representing 16.35 percent of all companies in the country, it is the biggest sector for both the number of people employed and annual sales revenue. In 2016 U.S. manufacturers contributed $2.18 trillion to the U.S. economy, representing 11.7 percent of the overall GDP.
"Although the manufacturing industry currently appears to be healthy, there may be signs that this strength may be short-lived," explained Matthew Debbage, CEO of Creditsafe USA and Asia. "The biggest indicator lies in the number of bankruptcies, with an overall bankruptcy rate of 0.34 percent. While this has improved in recent years, it is still higher than the overall national average. In addition, this industry faces increasing pressures with competition from lower-cost offshore importers, increasing cost of raw materials. Recent bankruptcy filings by companies such as Kansas City-based CST Industries Inc. and Georgia-based manufacturer of solar cells Suniva underscore the potential future for this sector."
The report also notes that:
- Small companies—those with fewer than 100 employees—comprise 94.48 percent of the sector, as compared to 94.82 percent of all U.S. businesses.
- The majority of U.S. manufacturing businesses have been in existence longer than those in other industries, with more than 23.88 percent operating for two to five years, as compared to only 2.32 percent nationally.
- From 2012 to 2015, there was a 35 percent decrease in the number of bankruptcies within the manufacturing sector, but the overall bankruptcy rate is significantly higher than that of all other U.S. businesses.
- The manufacturing industry ranks third in the highest number of bankruptcies per 100,000 companies with 362, following behind construction with 459 and other services at 412.
"The sheer size and nature of this industry makes it extremely vulnerable to many external market forces. It is a sector that needs to be closely monitored, as it poses a significant risk to the health of overall U.S. economy if there is continued decline," said Debbage.
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