Citi Commercial Bank 2024 Global Industry Insights Report

especially in the U.S. andWestern Europe, and that’s adding pressure to Industrials companies in particular. Wage growth, plus an undersized talent pool in some key markets —U.S. industrials often point to banking and tech attracting more talent than engineering—means staffing remained a problem in 2024, albeit a marginally smaller one than last year. FUTUREPROOFING One notable change this year for Industrials has been a sharp rise in the importance of sustainability. In 2023, around 39% of respondents said climate change was a primary focus. This year, around 84% of respondents agreed that sustainability was a pertinent and important factor in their long-term considerations. Perhaps carbon- intensive companies are becoming more aware of green subsidies and getting ahead of green legislation. Meanwhile, robotics and automation are more popular than AI where new technology is concerned. But withmanufacturers increasingly needing to embed technology into their products— autos and arms are two standout examples—applications that didn’t exist yesterday may explode tomorrow, making this an area to watch. SUPPLY CHAIN-REACTION SPARKS NEWMARKET TEETHING PAINS Just under half of Industrials leaders surveyed saidmanaging supply chains was the biggest obstacle to overcome. A company with efficient supply chains and financial networks in one place must now start from scratch in another. Respondents wanting simpler, scalable ways of entering markets jumped to 40% from26% last year. Previously, manufacturers could make products domestically and export them globally. But trade policies aimed at clawing back industry from cheaper jurisdictions, the frailties exposed by the pandemic, and the impact of wars on logistics have forced manufacturers to broaden their bases and expand into unknown newmarkets. INFLATION AND HIGH LABOR COSTS AREN’T LETTINGGO The need tomake supply chains broader andmore resilient —we expect that to push expansion in North America and Southern Asia in particular — is one factor increasing costs in an industry where capital spending and financing costs are naturally high. Inflation continues to feed faster wage growth and higher labor costs, Despite the headwinds facing Industrials companies, survey respondents show that they are finding newmarkets and newways to generate returns andmanage costs, particularly where shifting supply chains are concerned. Many of the factors that dragged on Industrials companies in 2023 continue to linger: inflation, high interest rates and geopolitical tensions. But this year’s outlook is more optimistic than last year’s. SATISFACTIONON THE RISE Two-thirds of this year’s Industrials respondents said they were satisfied with their financial progress, up from around half last year. Mitigating risk is baked into the fabric of the industry, and where solutions to broader problems are unavailable, manufacturers will increase prices. Roughly 69% of respondents reported that keeping costs down was their biggest concern. That’s a drop from around 80%, but the industry is still more worried about inflation than any other surveyed. Despite improving, costs are still a clear concern. Industrialists also topped the list of those who want to improve working capital, presenting a picture of an industry navigating a minefield of stubbornly high labor, logistical, and financing costs. Industrial companies are still growing, even as the world gets harder to navigate INDUSTRIALS “In Industrials, companies are quite resilient. With all of these challenges — costs, conflicts, additional tariffs — they are finding ways to mitigate those risks. That’s why we see many companies expanding into international markets.” Huaijin Bao Huaijin Bao Global Head of Industrials, Citi Commercial Bank