Here is the summary for this month’s Global Manufacturing Economic Update:
Last week, we learned that the U.S. trade deficit narrowed in March. While the headline number might seem positive at first glance, the trade gap shrunk on declining levels of both exports and imports. This report was one of the more disappointing ones of late. After slowing to 5.5 percent growth in 2012, manufactured goods exports have eked out only a 1 percent gain in the first three months of 2013 so far. The data suggest that export sales have essentially stalled. The largest weakness is in the European market, but exports to Canada—our largest trading partner—also declined. Asia and South America saw the largest gains, with manufactured goods exports to China up 9.3 percent during the first three months of this year relative to the same time period last year.
There has been considerable weakness in U.S. manufacturing data during the past few months, with the Institute for Supply Management’s Purchasing Managers’ Index (PMI) decelerating and manufacturing employment unchanged in April. Regional sentiment surveys have also suggested softness in the sector, with slower sales dragging optimism lower. Domestic policies are fueling weakness in the sector, including higher taxes, tighter government spending and regulatory uncertainties. Nonetheless, our largest trading partners continue to see slower sales, with discouraging export numbers highlighting the slowdown.
Economic reports internationally also showed weakness. The JPMorgan Global Manufacturing PMI decreased from 51.1 in March to 50.5 in April, signifying very sluggish growth in production, new orders and hiring worldwide. Four of the top 10 markets for U.S.-manufactured goods have declining manufacturing activity levels, with three of those markets being in Europe. Moreover, the other six markets are growing at a very gradual pace. GDP, industrial production and employment data mirror these findings, with a deepening recession in Europe, slower-than-expected growth in China and notable decelerations in Canada and other major trading partners. The coming week will provide even more insight on the health of the global economy, with key GDP and production reports from Europe, China and the United States.
In other news, the World Trade Organization selected Brazilian Roberto Carvalho de Azevêdo as its new leader on May 8, marking the first time that a Latin American will lead the trade organization. Work continues in the Trans-Pacific Partnership (TPP) talks, with the next round starting on May 15 in Lima, Peru. The U.S. government receives comments on May 10 on negotiating priorities in the trade talks with the European Union that will start this summer. Domestically, the Senate took the first important step toward the confirmation of the head of the Export-Import (Ex-Im) Bank, with action needed by July to ensure that Ex-Im can continue its operations.
Chad Moutray is chief economist, National Association of Manufacturers.
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