Here is the summary for this month’s Global Manufacturing Economic Update:
The new year has begun with some stronger economic data worldwide. While persistent challenges remain—most notably in Europe, but also some lingering fiscal worries in the United States—the overriding trend has been for some modest gains in new orders, production and hiring in a number of key markets for U.S.-manufactured goods. Seven of the top 10 export markets have economies that are expanding, and there were signs that the pace of the contraction in Europe and Japan eased a little. The Purchasing Managers’ Index (PMI) for the Eurozone rose from 46.1 in December to 47.9 in January. The largest improvements in manufacturing, however, were in Asia, where the pace of industrial production has picked up some steam in the past few months. This news spreads beyond China and into other parts of Asia as well.
Our largest trading partners are Canada and Mexico. Much like the United States, Canada’s economy appears to have stalled of late. This is not surprising given the closeness of our two nations in terms of commerce. U.S. frustrations with the fiscal cliff and upcoming federal budgetary battles tend to resonate beyond our borders, with the effects most felt in Canada. Real GDP is expected to grow around 2 percent this year in Canada, mirroring the forecasts for the United States and essentially repeating last year’s rate. Reflecting these trends, Canada’s PMI suggested very slow growth in January, unchanged from December. Mexico’s economy, meanwhile, decelerated throughout much of the second half of 2012, both leading up to and after its presidential elections. Some of the slowdown involved a wait-and-see approach as business leaders assessed the impact of possible new policies coming from the new presidential administration. Industrial production and PMI values tend to reflect this easing, but Mexican real GDP is still expected to grow 3.8 percent in 2013, which is a solid number.
Even with the progress in foreign markets, the most recent international trade figures were a bit of a surprise. The U.S. trade deficit declined sharply from $48.6 billion in November to $38.5 billion in December. Changes in the petroleum balance partially contributed to the decline, but in general, it was a healthy increase in goods exports corresponding with a decrease in goods imports. For the year as a whole, U.S.-manufactured goods exports rose 4.9 percent in 2012 at the non-seasonally adjusted rate, well below the 15 percent rate necessary for the United States to double exports by 2015. While we were on pace for that in 2011, a number of headwinds globally—including a recession in Europe and slowdowns elsewhere—eased the growth of new export sales significantly in 2012, frustrating manufacturers in the United States. Perhaps the improvements noted in this document more recently will bode well for better export figures in 2013.
Next week, we will be closely following industrial production and GDP releases worldwide. Provisional GDP in the Eurozone is expected to show continental output shrinking around 0.3 percent, with data from a number of member countries reflecting weaker conditions as well. Similarly, Eurozone industrial production is forecasted to fall 1.4 percent. Outside of Europe, China will release its trade figures at the beginning of the week, and if recent surveys are accurate, its exports should be improving. In the United States, the Federal Reserve Board will unveil its latest industrial production figures, with an expected slight gain in January.
Chad Moutray is the chief economist, National Association of Manufacturers.
Latest posts by Chad Moutray (see all)
- Kansas City Fed: Manufacturing Activity Continued to Improve in October - October 27, 2016
- New Durable Goods Orders Continue to Disappoint in September - October 27, 2016
- Richmond Fed: Soft Manufacturing Activity Once Again in October - October 25, 2016