Amid Sharp Contraction for Machinery Manufacturing, Packaging Sector to Grow 0.5% in 2024

As we dive deeper into the second half of 2024, the manufacturing industry, and particularly machinery sectors, continue to feel the pressure of a turbulent global market. Specific sectors such as packaging machinery and semiconductor equipment are showing resilience, while strategic shifts in manufacturing are expected to lead the way to recovery in 2025, according to the latest Interact Analysis Manufacturing Industry Output (MIO) Tracker.

China, the world’s largest machinery producer, is dealing with a critical issue: overcapacity. Overcapacity in China is driven by structural issues, such as misaligned investment incentives and razor-thin profit margins. Short term factors, including investment shifting from real estate and other sectors to manufacturing, created a glut of machinery, with China now producing 33.9% of the world’s machinery output. This dominance, while impressive, has created an imbalance in the market, as the excess supply has outpaced demand. The combination of weak domestic demand and exports created a cyclical overcapacity problem for China’s machinery market. The sheer scale of China’s machinery production has put downward pressure on prices globally, making it difficult for other regions to compete. Oversupply has also discouraged new investments in innovation within China, as manufacturers focus on offloading existing inventory rather than advancing new technologies, further stalling growth in the sector.

Looking to the Americas, one key issue that could hamper US machinery market recovery in 2025 is the speed of technological adoption. For example, sectors like semiconductor equipment are gaining a lot of attention due to government initiatives like the 2022 CHIPS and Science Act, but such efforts take time to bear fruit. A significant proportion of domestic machinery production still lags behind globally in terms of adopting cutting-edge technologies such as AI-driven manufacturing and robotics. Key investments, including those driven by the Infrastructure Investment and Jobs Act, are expected to spur demand for machinery across the construction and manufacturing sectors. Additionally, the US government’s focus on developing domestic semiconductor production is expected to further strengthen the machinery sector, with accelerated growth forecast for semiconductor technology in the years ahead.

Meanwhile, Germany, a traditional powerhouse in machinery production, is facing significant headwinds. The German machinery sector is forecast to decline by 2.5%* in 2024, with packaging machinery feeling the impact of weakened domestic demand and fierce competition from Asian manufacturers. However, Germany’s focus on high-quality, precision packaging machinery for industries such as pharmaceuticals and food processing is helping to cushion the blow. The country’s strong reputation for engineering excellence remains a key asset, although its ability to remain competitive will depend on how quickly it can adapt to rising demand for more automated and sustainable packaging solutions.

Packaging machinery is a rare bright spot

Unlike most other machinery sectors, packaging machinery is a rare bright spot in 2024, with a 0.5% increase anticipated globally. The sector’s resilience is largely due to its early and sustained investment in automation. As companies in China, Italy and the U.S. continue to embrace automation to improve efficiency and cut costs, albeit at different rates, packaging machinery has become a critical area of focus. The acquisitions we’ve seen, like Ishida Europe’s purchase of National Packaging Systems, show companies are consolidating to secure a competitive edge. In this market, the companies that can most effectively leverage automation to address sustainability concerns will lead the charge into 2025 and beyond.

Final thoughts

While the global machinery sector is facing significant challenges in 2024, the packaging machinery segment is proving to be a resilient outlier and looks set to continue its growth trajectory, helping to lead the wider machinery industry out of its current slump. However, uncertainties remain, particularly regarding how quickly other parts of the industry can recover. Strong growth in some smaller Asian territories such as South Korea and Germany’s struggles highlight the varied performance across regions and territories, while factors such as competitive pressures in Europe and evolving demand for sustainable solutions will influence outcomes. Much like China’s overcapacity issue, Europe’s response to rising competition will be critical. Despite these challenges, there is optimism that 2025 will mark a turning point, with innovation and automation playing key roles in driving recovery.

Interact Analysis’ Manufacturing Industry Output (MIO) Tracker forecasts out to 2028 and covers a total of 45 countries, across 72 manufacturing end user sectors, 30 machinery sectors and two points in the supply chain (machinery and manufacturing end-users).