The fourth quarter of 2014 showed modest growth, which may be a sign of what’s to come. Read on to learn more about Bishop & Associates’ preliminary 2015 cable assembly industry outlook.
Cable assembly demand in 2014 was high through September, with year-to-date sales up almost 10% to more than $103 billion. Cable assembly demand slowed somewhat in October, which suggested that growth in 4Q14 would be modest (low single digits). Bishop forecasted that industry sales would grow +8.2% in 2013 to $137 billion*.
So where does that put the forecast for 2015? We believe the soft demand in 4Q14 is a trend that will carry over into 2015. Although 2015 will be a growth year, the growth will be at a slower pace than 2014. A number of major trends will affect the industry.
On the negative side:
- GDP growth is slowing worldwide.
- Several of Europe’s economies are flat-to-declining with no expectations for immediate improvement. Germany, Europe‘s largest economy, has been stuck around or below 1% growth for six quarters (excluding 1Q14 at 2.6%).
- China’s GDP growth is forecast to decline over the near term. Growth at or below 7% is expected.
- Japan’s economy is close to slipping into recession.
- The automotive industry, which has fueled much of the cable assembly industry’s growth in the last two years, is forecast to slow over the next few years.
- Consumer confidence is trending down in many of the major economies.
- The manufacturing PMI index is hovering around 50% in many major countries.
- Lower oil prices are hurting the economies of oil-producing countries.
On the positive side:
- Interest rates are low.
- The US economy is growing.
- Unemployment levels are decreasing in the US.
- Energy costs are low, helping the economies of oil consuming countries.
- Inflation is modest and unlikely to rise any time soon.
As a result of the above, we believe cable assembly demand will slow from the high single-digit growth seen in 2014. 2015 will probably result in growth in the 3% to 5% range. We do not, at this time, believe sales demand will decline to negative levels in 2015. An updated forecast will be forthcoming in late January when the final results for 2014 are tallied.
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