Following a period of stagnation since 2016, US suppliers will lead a period of “steep” growth for the international aerospace industry, a new economic study says.
Oxford Economics says industrial output of aerospace suppliers in the US, UK, eurozone and Japan was flat in 2016 in net value terms, and is estimated to have declined around 0.1% last year. Figures for 2017 are projections based on government data from the January-October period, the UK advisory body says.
It says that in the US – the largest aerospace market – production fell 1.4% in 2016 and 2.7% in 2017, while the entire industry's output grew 0.6% and 0.3% in the two years, respectively.
This may sound surprising, given a backdrop of record commercial output: Boeing disclosed on 9 January that its commercial division delivered 763 aircraft in 2017 – up from 748 in the previous year – and that its net orders had grown 36% to 912 during the period; Airbus will reveal its order and delivery figures for 2017 on 15 January, but preliminary data from Flight Fleets Analyzer indicates the airframer handed over at least 704 commercial aircraft in 2017, up from 688 in the previous year.
Oxford Economics senior economist Stephen Foreman tells FlightGlobal that the study is based on data from national statistics offices, and that there may be "divergences" with financial reports by individual aerospace companies.
Oxford Economics now predicts “multiple years of robust expansion… until the end of the decade”.
Production in the US aerospace industry is projected to grow 2.9% this year, and 3.4% in 2019 and 2020, the company says. Meanwhile, combined output across the US, UK, eurozone and Japan is set to rise 3% in 2018, and 3.1% per annum in 2019 and 2020.
The growth expectations are based on a range of factors, including order backlogs, production ramp-up plans by Airbus and Boeing, low fuel costs, and “continued passenger growth [and] strong ongoing momentum in world trade, with a knock-on boost to air freight”.
Oxford Economics says increased geopolitical tensions and an expected rise in US defence spending under the Trump administration reinforces a “belief that the global defence spending cycle is turning”. However, the forecast cautions that typically long lead times in military programmes mean production can only “significantly” grow in the medium term.
The UK aerospace industry has showed “remarkable resilience” since the 2016 referendum to leave the European Union. “In contrast to developments elsewhere in UK manufacturing, the aerospace sector has weathered its Brexit-vote shock better than expected,” Oxford Economics says.
Following 5.5% growth in 2016, output by the country’s aerospace industry grew by 9.8% between January and October 2017. For the full year, a rate of 9.2% is expected – representing the fastest growing aerospace market among the G7 countries.
The report says long lead times for existing programmes and sterling’s depreciation since the Brexit vote “have helped sustain momentum”. Growth is forecast at 2.3% for the current year, and at 1.4% and 2.2% in 2019 and 2020, respectively.
But with "continued uncertainty around the transitional and eventual deal on the movement of people and goods, the Brexit impact upon an aerospace sector highly integrated into EU operations dominated by Airbus looks increasingly damaging to medium-term UK prospects,” the study says.
In the eurozone, growth in the sector is expected to have halved to 2.9% during 2017, compared with the previous year. This was due to a “slowing in Germany and France's output growth, and a second year of expected contraction in Italy”.
However, the research foresees growth across the eurozone accelerating to 3.4% in both this year and in 2019, and to 3.5% in 2020.
Meanwhile, aerospace output in emerging markets is thought to have grown 2.8% in 2017, following a 4.7% increase during the previous year. Oxford Economics predicts growth to rise to 7.3% in 2018 and 5.6% in 2019.
The agency says that aerospace suppliers in Brazil and Russia are “set to see a turnaround in their fortunes”. In Brazil, the sector’s output declined 21.3% and 10.8% in 2016 and last year, respectively. But this is set to return to 1.4% growth in 2018, and to 3.6% next year.
Russia’s aerospace output declined 17.5% in 2017, but is forecast to swing to 12.1% growth this year, the study says.