US aerospace and defense export growth faces global competition
US aerospace and defense industry export and labor market study by Deloitte
The US aerospace and defense (A&D) industry has been a significant contributor to America’s net exports, a top employer, taxpayer, and major contributor to the nation’s gross domestic product. However, recently we are seeing a slowdown in the industry.
A strong US dollar, increasing global competition, and decreasing export financing are causing US aerospace and defense (A&D) industry export growth to decline. At the same time, employment in the US aerospace and defense sector has declined significantly over the last five years, much of it due to budget sequestration. What can the industry do to change course?
Our latest aerospace and defense industry study includes developments and trends from two important focus areas in the US aerospace and defense industry: employment and exports.
Last year, we developed two separate reports that highlighted industry trends in both of these areas. This year, readers who download the report will experience the same beneficial information tied together in one comprehensive report.
Report findings include:
- Export growth slowed at 1.7 percent in 2016
- Exports directly supported 1.42 million jobs in 2016
- Net commercial exports rose sharply in 2016 by $9 billion or 12 percent
- US Foreign Military Sales declined by $13 billion or 28 percent in 2016
- Total employment in the US A&D sector decreased in 2016 by 0.3 percent
- Direct and indirect jobs lost in the defense subsector between 2011 and 2016 totaled 165,044
Source: 2017 US aerospace and defense industry export and labor market study
Defense subsector expands, while Commercial Aerospace growth slows down
According to Deloitte Aerospace & Defense Financial performance study:
Global aerospace and defense (A&D) sector revenues grew by 2.4 percent to US$674.4 billion in 2016, slightly above the estimated global domestic product (GDP) growth of 2.3 percent.
The top 100 companies analyzed added US$15.7 billion in revenues, with growth primarily driven by the European commercial and US defense subsectors. In terms of incremental revenue growth by segment, the original equipment manufacturers (OEMs) and electronics segments were the top contributors, adding US$3.4 billion and US$3.7 billion respectively.
Here below you can find key insights
- Global aerospace and defense sector revenue growth is slowing, marginally outpacing global GDP growth
- European A&D sector revenue growth continues to outperform the US sector
- The global defense subsector continued to recover as global defense spending increased, especially in the United States
- Global commercial aerospace revenue growth slowed from 6.3 percent in 2015 to 2.7 percent in 2016
- The OEMs and electronics segment experienced incremental revenue growths
- Global defense operating margin growth strengthens as the commercial aerospace margins tighten
- Propulsion segment was the leader in operating margins. However, Tier two suppliers now rank second
- Sector productivity experienced a moderate improvement in 2016, led by strong growth in Europe
- Debt levels continue to rise as companies increase leverage to finance acquisitions, share buybacks, and develop new and innovative products
- US and European A&D stocks outperformed their respective market indices
Source: Deloitte 2017 A&D Financial Performance Study