World aerospace set for steep take-off
The central forecast now envisages multiple years of robust expansion in the sector’s activity until the end of the decade. This comes after a subdued couple of years marked in the developed world industry by stalled output in 2016 and what we expect to emerge as a small drop of around 0.1% for last year.
The bullish prognosis for aerospace worldwide is underpinned by a projected turnaround for the industry in the US, which we estimate is likely to register a second year in a row of falling output, with an even steeper decline of 2.7% for 2017 forecast after 2016’s 1.4% drop. In contrast, Oxford Economics expects US aerospace production going forward to pull out of this slump, and climb sharply – rising by a projected 2.9% this year, and a still-stronger 3.4% in 2019 and 2020.
The US aerospace revival in turn underpins an expected turnaround in the sector across the developed world, with growth of 3% this year expected to follow 2017’s projected small output fall of 0.1%, and two more years of strong 3.1 per cent developed world expansion expected for the industry in 2019 and 2020.
With several key emerging market countries’ aerospace sectors (notably Russia and Brazil) also set to see a turnaround in their fortunes, reinforcing the upward trend across the industry, we see sector growth globally of 3.6% in 2018 and 3.5% in 2019, after just an expected 2017 out-turn of just 0.3%
Greater momentum in the industry’s output is underpinned by a series of factors, notably order backlogs and plans by the sector’s dominant players, Boeing and Airbus, to ramp-up deliveries. Continued passenger growth, strong ongoing momentum in world trade, with a knock-on boost to air freight, and low jet fuel costs all combine to support airlines’ fleet plans and aerospace manufacturers in turn.
An expected increase in US defence spending under plans by the Trump Administration also contributes to growth over the medium term and serves to reinforce the belief that the global defence spending cycle is turning.
Within Europe, the UK aerospace sector has weathered the shock from the country’s vote for Brexit and the uncertainties associated with intended departure from the EU well, demonstrating notable resilience, with the industry’s output expected to have leapt by 9.2% in a buoyant 2017, after 5.5% growth in 2016. Yet while the UK sector may be set to cheer a 2017 showing that looks set to have been the best in the G7, 2018 looks to be more challenging against a backdrop of persistent Brexit-related uncertainty and we expect output growth to drop back to a 2.3% rate.
In the eurozone, aerospace is set to climb a more steeply, with forecast 2018 growth of 3.4%, after a 2017 slowdown that is expected to have limited to its expansion to 2.9% after a strong 2016. Oxford Economics see a pick-up this year as being driven by order backlogs and robust passenger demand. Airbus continues to attract new orders which will support output further ahead.
