2024 – Climbing Our Way Back to the Top

After a year of strong single-digit growth, no one seemed surprised that the industry would decline in 2023. With industry sales performance based strongly on location and market sector, the European region grew 3.8%, while the Asia Pacific and Chinese regions declined, -7.3% and ‑5.7% respectively, 2023 offered several surprises. Considering that year-over-year bookings did not turn positive until the fourth quarter and year-to-date bookings remained negative throughout all of 2023, it is remarkable that the industry performed as well as it did overall.

2023 was a year marked by national, regional, and local conflicts and disasters. Even as material, overhead and labor prices rose, the industry managed to push on, showing remarkable resilience. Raging wildfires, drought, cyclones, storms, earthquakes, and massive flooding marked just a few of the natural disasters the world contended with.

2024 and Beyond Outlook

With industry backlog remaining strong, Bishop is forecasting 2024 sales to increase in 2024. We anticipate the greatest percentage increase will occur in North America, followed by the Asia Pacific region. When looking at growth in US dollars, we forecast the largest increase in sales will be seen in the Chinese region. We forecast the North American region to have the second largest increase in sales in 2024.

Forecast Assumptions

Forecasting is always difficult, especially during times of financial and geopolitical uncertainty. Projecting future business conditions in this environment is almost impossible. Consider the following economic headwinds, political challenges, and uncertainties.

• Although still considered unstable, the economy has shown it is amazingly resilient. Driven by surprisingly strong, steady growth, many countries have seen inflation slowing, almost as quickly as it came upon us. According to the International Monetary Fund, “The baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies—where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025—will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025.”
• Highly unlikely that the Federal Reserve will cut interest rates anytime soon. According to Thomson Reuters, “the US Federal Reserve signaled it is still leaning toward eventual reductions in borrowing costs, but that cuts could be delayed as recent inflation numbers have strayed further from its two percent target.” “Investors are now betting that the U.S. central bank will start cutting rates in November and that it will deliver at least one reduction in borrowing costs this year.”
• Although global supply chain issues have improved drastically, as quoted by Border States, “Ocean freight rates are on the rise based on strong demand and longer sailings driven by environmental and geopolitical issues in the Panama and Suez Canals.” This, coupled with volatile fuel rates because of instability in OPEC+ countries, has affected shipping rates. Other issues like the collapse of the Francis Scott Key bridge (Baltimore, Maryland, US) in March has had some impact on the US supply chain, although near normal operations” resumed in late May.
• Prompted by geopolitical worries and supply constraints, the price of gasoline has continued to rise and may potentially hinder efforts to tame inflation. After declining earlier in the year, oil prices have climbed in recent weeks, spurred by concerns over supplies and geopolitical risks, including wars in Ukraine and the Middle East. It is also important to remember that higher oil prices drive up not only transportation and production costs, but eventually pass through to the prices of other core products like food and energy.
• A shortage of labor, in particular skilled laborers, such as electricians, plumbers, carpenters, machinists, welders, pipefitters, and steelworkers, even doctors, nurses, and pharmacists. A number of reasons are sited for this shortage including a decline in apprenticeship programs and shop classes, an increase in employees retiring, particularly Baby Boomers (generally classified by those born between 1946 and 1964 – according to Annuity.org, from 2021 to 2019, he number of retired workers increased from 45.1 million to 69.8 million) and not being replaced by younger workers, and a major shift in workers expectations, covering pay, hours, working location, and flexibility. In the US alone, according to the U.S. Chamber of Commerce, “right now we have 8.5 million job openings in the U.S. but only 6.5 million unemployed workers.”
• Increasing and prolonged political tensions: Israeli-Palestinian conflict over land and who controls it, a war between Russia and Ukraine that has gone on for two years, with no end in sight and that has increased already high tensions between NATO and  Russia, heightened friction between China and Taiwan with the US bound by law to provide Taiwan with defensive weapons and US President Joe Biden announcing the US would defend Taiwan militarily – breaking with a stance known as strategic ambiguity and a major humanitarian crisis in Haiti as gangs have cut off relief efforts from the rest of the world, making it impossible to reach thousands of people suffering from malnutrition.  China’s continued military buildup, which includes rapid development of its nuclear, space and cyberspace capabilities. According to Heritage.org, “over the last 12 months, China built 100 new nuclear weapons—making it the fastest growing nuclear power on the planet. Beijing is on track to numerically match the U.S. nuclear arsenal by 2032.”
• Increased commodity prices. While most commodity prices remained flat, rising only 0.8% in 2023, versus 12.1% in 2021 and 4.8% in 2022, the prices for oil and copper are on the rise in 2024. In April of 2024, copper prices had increased 8.92% from the previous year and 7.44% from one year ago. Like copper, oil is up 5.35% from last month and 6.73% from one year ago.
• Lack of affordable housing. As detailed by the Migration Policy Institute, “an estimated 1.6 billion people—one-fifth of humanity—lack access to adequate housing and basic services…and this number could rise to 3 billion by 2030. Over the last decade, housing prices have grown faster than incomes in most countries according to the Organization for Economic Cooperation and Development (OECD).” Although there are several reasons for the shortage, one of the most basic is the inability of the housing market to keep up with the growing population. The growth of profit-seeking investors, who purchase large numbers of houses and apartments, higher interests, and other factors such as material delays, shortages and increased material and labor costs, also impact the shortage.

In Bishop’s 2024 Connector Industry Forecast, there are some interesting projections as to why we will see connector growth in 2024 and beyond, and what that growth will be. This report details the markets where Bishop anticipates growth, and which subsectors will drive that growth. This report provides projections over the next five years. Will the industry continue to grow, and which years may not be as strong as others? The answer to these questions can be found in the June 2024 Connector Industry Forecast.

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