Manufacturers expect to see continued increase in both labour and material costs over the next six months, although to a lesser extent than previously anticipated, according to IPC’s February 2023 Global Sentiment of the Electronics Supply Chain Report. On a positive note, backlogs are expected to decline.
On average, electronics manufacturers expect labour costs to increase 9.2 percent over 2022 levels; materials costs to rise 9.9 percent during the year and most surprisingly, they expect freight costs to rise 7.2 percent in 2023. “Though manufacturers anticipate freight costs to rise, depressed demand and improving supply chain dynamics are currently pulling freight costs down, a trend that should continue during the year,” said IPC Chief Economist Shawn DuBravac. “Downward cyclical pressures will curtail volume which should keep prices in check. For some companies, declining freight costs are likely to be their most significant cost savings in 2023.”
The industry association’s February Economic Outlook report, meanwhile, provides a mixed view of the economy.
“On one hand, economic fundamentals continue to slow,” said DuBravac. “However, despite aggregate softness, certain segments continue to do well. For example, the defense and space equipment sector hit another new high in January, aerospace is up significantly from pre-pandemic levels and other sectors key to the electronics industry are holding up well.”
EU electronics manufacturing output fell in December 2022
The report also shows that manufacturing sectors in Europe, the U.S., and China are all signalling contraction according to their respective PMI indexes, but in China and Europe at least, things are looking less bad this month. Despite signs of slowing demand, manufacturers continue to hire. “The broader economy added more than 500,000 new jobs, a shocking number in the midst of what many believe is the start of a recession,” added DuBravac.
The report also found that EU electronics manufacturing output fell in December after a one month increase in November. Output declined 1.4 percent (month-on-month) and is down 0.9 percent over the last year.
Despite indications that the global economy continues to slow, economists have marginally raised forecasts for economic growth in the U.S., Europe, and China for 2023.
