Here is the summary for this month’s Global Manufacturing Economic Update:
While much of the focus of late has been on the fiscal cliff, manufacturers have also been worried about slowing global sales. Business leaders have said that increasing their exports has been a struggle. Yet, despite these headwinds, year-to-date growth in U.S.-manufactured goods has risen almost 5 percent. The good news is that this figure represents positive growth, but it also shows significant easing from the same time period last year. Much of the deceleration in exports corresponded with challenging economic environments in a number of countries, going beyond Europe’s struggles to include Brazil, China, Japan and elsewhere.
The latest data indicate that the global economy appears to be strengthening, which should bode well for improving international trade this year. Europe and Japan are exceptions as both continue to experience significant weaknesses in their respective markets. The purchasing managers’ indices (PMIs) for both remain negative, with new orders, production and employment contracting. Political and economic uncertainties permeate these data, with manufacturers uncertain about what the future holds. Elsewhere, the trends are more positive. Seven of the top 10 markets for U.S.-manufactured goods have economies that are growing—a definite improvement from three months ago when just four of them did. As a result, we are seeing pickups in manufacturing activity and business confidence. This does not mean that these economies are growing strongly, but it does suggest that global trends have stabilized and are moving in the right direction.
Ironically, the political battles over U.S. fiscal policy had implications beyond our borders, with concerns about a possible economic downturn a top concern among our trading partners. This was especially the case for Canada, our largest trading partner, but other nations fretted about our fiscal situation, as well. With a deal to avert the fiscal cliff, at least some of these anxieties will go away for now. However, there are still larger concerns about the long-term fiscal health of the United States, and possible battles over raising the debt ceiling will keep these issues front and center. Nonetheless, the United States is now poised for modest growth in 2013, with rising exports a major contributor both to our macroeconomic picture and to manufacturers’ business plans.
Next week, we will receive data on November’s U.S. trade balance. The previous month saw a widening of the trade deficit, with both exports and imports lower. Hopefully, a slowly improving global economy will help to turn that around. Globally, we will get the latest industrial production and retail sales data from a number of European countries, with the European Central Bank meeting to discuss its monetary policy plans for the first time in 2013. Trade data will also be released for China, as well as indices for consumer and producer prices. The larger number to watch from the Chinese perspective will be real GDP growth, which will be out on Wednesday, January 16, and is expected to show an increase of 7.7 percent.
Chad Moutray is the chief economist, National Association of Manufacturers.
Latest posts by Chad Moutray (see all)
- Durable Goods Orders Off by 1.2% in October on Aircraft Sales Volatility, Long-Term Trend Remains Favorable - November 22, 2017
- Existing Home Sales up 2% in October - November 21, 2017
- Chicago Fed: National Activity Index in October at Highest Point Since January 2012 - November 21, 2017