Posted by John Keller
THE MIL & AERO BLOG, 1 Oct. 2013. As those of us involved in the aerospace and defense industry know all too well, the Pentagon budget process has been a train wreck over the past couple of years, with sequestration, program cuts, and shrinking defense contractors only part of the story.
Still, I saw my first good news in a long time over the past few days with a report that U.S. military and homeland security spending actually could INCREASE over the next five years.
No, you didn't misread that. The Dublin-based market research firm Research and Markets predicts that U.S. defense spending will increase from 2013 to 2018 at a compound annual growth rate (CAGR) of 1.93 percent.
Okay, I know that's not a big number, but at least the trend might be headed in the right direction. Homeland security spending, meanwhile, should grow at a CAGR of 2.15 percent through 2018, analysts say in a report entitled "Future of the US Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018."
Acquisition of advanced defense equipment coupled with replacement of old and obsolete equipment should drive the country's capital expenditure over the next half-decade, presenting growth opportunities for the defense equipment and technology suppliers, despite the continuing threat of budget cuts and sequestration, analysts say.
Driving the homeland security market should be missions such as preventing terrorism and enhancing security; securing borders; enforcing immigration laws; securing cyberspace; and disaster preparedness.
During the forecast period, the U.S. government is expected to invest in homeland security products such as surveillance equipment, and cutters and patrol vessels. The U.S. homeland security budget is expected to increase from $60.7 billion in 2013 to $65.3 billion in 2018.
When was the last time you heard a market research firm predict an uptick in defense spending? I know, I can't remember, either. If those analysts are right -- and let's hope they are -- it begs the question: has U.S. defense spending finally bottomed out? Are things finally going to start getting better?
This is more than welcome news to a beleaguered U.S. defense industry, where employees have been spending more time in job fairs than they have in designing new military technologies.
It's too early to tell, of course, but perhaps now defense company executives can start planting the seeds of long-term growth -- shallow though it may be -- rather than bailing seawater as fast as they can.
There's more difficulty in store for the defense industry, make no mistake. We have three more years of Obama ... don't get me started ... and a very uncertain road ahead. Still, this is the first indication I've had in a long time that our industry can start the process of growing, and abandon now-familiar damage control.