Tag: Canada

Global Manufacturing Economic Update – July 11, 2014

Here is the summary for this month’s Global Manufacturing Economic Update: 

The global economy improved slightly in June, showing some signs of stabilization from weaknesses in prior months. The J.P. Morgan Global Manufacturing Purchasing Managers’ Index (PMI) increased from 52.1 in May to 52.7 in June, its fastest pace since February. Various measures of activity were mostly higher, including new orders, production and employment. Behind this figure, the data also reflected economic progress in countries such as China, Hong Kong and Japan, each of which shifted from a contraction in May to slight growth in June. As a result, just 2 of the top 10 markets for U.S.-manufactured goods had PMI values below 50 in June, an improvement from the five that registered contracting levels in May. Our largest trading partner’s values, the RBC Canadian Manufacturing PMI, increased from 52.2 to 53.5, reaching its highest point since December.

Europe dominated economic headlines on July 10, with worries about a large Portuguese bank and falling industrial production figures for France (down 1.7 percent), Germany (down 1.8 percent) and Italy (down 1.2 percent). Indeed, European growth has continued to ease, with the Markit European Manufacturing PMI down from 52.2 to 51.8. On the positive side, manufacturing activity has now expanded for 12 straight months, but the economy in the Eurozone remains subpar overall. Real GDP was up just 0.2 percent in the first quarter and is expected to increase around 1 percent in 2014 as a whole. Still, growth varied widely from country to country. France sits on one end of the spectrum, with manufacturing sentiment worsening and falling to a six-month low. Meanwhile, Ireland and Spain experienced multiyear highs for sales growth, and new orders in the United Kingdom expanded rather robustly (up from 59.5 to 61.0).

In the emerging markets, manufacturers in Brazil, Russia, South Korea and Turkey reported contracting levels of activity in June, although Russian production grew for the first time in six months and South Korean exports began to stabilize. Overall, however, manufacturing activity in the emerging markets expanded for the second straight month, spurred higher by better news in some Asian economies. Stronger sales and output resulted in increased manufacturing PMI data for China, India, Indonesia and Taiwan. India also benefited from greater export growth. Next week, we will get new data on Chinese GDP, industrial production, fixed-asset investment and retail sales. Real GDP is expected to pick up slightly, from the 7.4 percent annualized growth rate experienced in the first quarter, with a consensus estimate of around 7.5 percent. While this is a marginal improvement, it also continues to reflect decelerating rates of growth from what was experienced in the past.

Looking at U.S. trade flows, petroleum helped to narrow the U.S. trade deficit in May, with more exports and fewer imports improving the headline figure. This continues a trend seen over the past few years whereby improved energy production in the United States has slightly helped balance the trade picture. Outside of petroleum, the numbers were less favorable. The average monthly deficit so far in 2014 reached $43.65 billion, higher than the $39.70 billion average for all of 2013. In addition, U.S.-manufactured goods exports continue to grow at a disappointing rate, up just 0.5 percent year-to-date versus this time last year using non-seasonally adjusted data. Nonetheless, exports of manufactured goods increased to all five of our largest trading partners through the first five months of this year: Canada, Mexico, China, Japan and Germany. That is an encouraging sign, even if we would like to see faster growth in our international sales overall.

On the policy front, the congressional debate on reauthorization of the Export-Import (Ex-Im) Bank continues to move forward, while action on other trade legislation is currently stalled. The World Trade Organization (WTO) officially began environmental goods negotiations, while both the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (T-TIP) continue. The U.S. trading relationship with key partners, including India, China and Russia, continues to be a focus.

Chad Moutray is the chief economist, National Association of Manufacturers. 

china pmi - jul2014

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Global Manufacturing Economic Update – March 21, 2014

Here is the summary for this month’s Global Manufacturing Economic Update:

Headlines around the world have focused on the Russian annexation of the Crimean peninsula from the Ukraine and the mysterious disappearance of a Malaysian Airlines jetliner. Each of these events injects an element of uncertainty in the global dynamic picture. Indeed, so far in 2014, the global economy has not built on the strong momentum that we saw in the second half of 2013. A number of winter storms in the United States, financial struggles in the emerging markets and decelerating growth in China have combined to soften growth in recent months. Yet, we should not lose track of the longer-term trend, as markets in many of our largest trading partners have made significant progress over the course of the past year, with modest growth rates overall.

The JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) increased from 53.0 in January to 53.3 in February, its highest point since April 2011. New orders, exports and hiring rose. That said, this global measure might also be skewed higher by stronger performance in the United States, with the Markit U.S. Manufacturing PMI jumping from 53.7 to 57.1, its fastest pace in nearly three years. Sales and production both rebounded in February after weather dampened demand and hampered output and shipments in January. Elsewhere, there were signs that manufacturing activity eased somewhat in February in a number of areas, with a definite split between the developed nations and emerging markets. The HSBC Emerging Markets Index dropped from 51.4 to 51.1, influenced by contracting levels of activity in China, Russia and South Korea.

Speaking of China, its manufacturing PMI has now contracted for two straight months, and a number of economic indicators suggest that its economy has continued to decelerate. Industrial production has slowed from 10.4 percent in August to 8.6 percent in February, and fixed asset investment and retail sales have also eased significantly. These data points suggest that real GDP might fall below the 7.7 percent rate seen in the fourth quarter. Still, growth remains strong overall, even if these figures are well below the rates of growth that many businesses have become accustomed to. In other news, the Bank of China has worked to weaken its currency over the past month, with the Chinese yuan depreciating more than 2 percent since mid-February. The Chinese government has engineered this devaluation, it says, to help fend off speculators; yet, it is also important to note that the yuan has generally appreciated against the U.S. dollar since 2005. (See the attached graphic.)

Looking at our largest trading partners, 8 of the top 10 markets for U.S.-manufactured goods had expanding levels of manufacturing activity, with five countries experiencing slightly faster growth in February than in January. For example, the Canadian economy grew marginally faster in the fourth quarter, with real GDP up 2.9 percent in the fourth quarter. Manufacturing capacity utilization and shipments have also picked up recently, and the RBC Canadian Manufacturing PMI increased from 51.7 to 52.9, suggesting modest growth.

Meanwhile, in Europe, sentiment dipped somewhat in February, but the trend since last summer remains positive. New orders, exports and production eased a little for the month, but growth still remained healthy overall. Real GDP increased 0.3 percent in the fourth quarter, but growth is expected to rise to 1.1 percent for 2014 as a whole. While that indicates very slow growth, it is enough to provide a psychological boost to many businesses and consumers. The one issue that we do continue to worry about is possible disinflation, with still-weak demand keeping price growth at a minimum. Consumer prices have risen just 0.7 percent over the past year, for instance.

On the policy front, the Senate Finance Committee boasts a new chairman, as trade legislation from Trade Promotion Authority (TPA) to the Miscellaneous Tariff Bill (MTB) awaits action. Globally, Russia’s activities in Crimea and the Ukraine are prompting action by the Obama Administration and Congress, while trade talks in the Asia-Pacific and with Europe continue. Work has started on a bill to reauthorize the Export-Import (Ex-Im) Bank before the end of September. Manufacturers are also seeking input on which products should be covered by new international negotiations to eliminate tariffs on environmental goods.

Chad Moutray is the chief economist, National Association of Manufacturers.

chinese yuan - mar2014

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Global Manufacturing Economic Update – January 10, 2014

This is the summary for this month’s Global Manufacturing Economic Update:

As we begin 2014, the global economy appears poised to grow stronger than it did last year. For only the second time since we have prepared this report, all top 10 markets for U.S.-manufactured goods were expanding, with Purchasing Managers’ Index (PMI) readings greater than 50. (The other time was last October) As recently as September, just six of these nations were growing. Such progress suggests that weaknesses experienced over the summer months have begun to dissipate, and indeed, we have seen stabilization in both China and Europe since then.

The U.S. manufacturing sector has also begun to pick up, with sales and production accelerating from the third quarter forward. Moreover, the budget deal passed in December and negotiated by Sen. Patty Murray (D-WA) and Rep. Paul Ryan (R-WI) hopefully will avoid a potential government shutdown until the fall of 2015—something that has helped ease some anxieties in the business community. Christine Lagarde, managing director of the International Monetary Fund (IMF), has said that the improved outlook in the United States will allow the fund to revise its global growth prospects. In contrast, the IMF had downgraded its estimates for worldwide growth in the midst of October’s budget impasse. At that time, it predicted 3.6 percent growth in world output for 2014, down from 3.8 percent in its summer forecast. The IMF will release its next World Economic Outlook by the end of January.

Despite progress on the international economic front, exports of U.S.-manufactured goods have continued to grow very slowly. Through the first 11 months of 2013, manufactured goods exports have risen just 2.0 percent relative to the same time frame in 2012. This represents a deceleration from the 5.7 percent annual pace for 2012 and the roughly 15 percent required to meet President Obama’s National Export Initiative goals. Goods exports to Europe fell from 2012 to 2013, and we saw some easing in many other key markets as well. One of the brighter spots was goods exports to China, even as we continue to have a large trade deficit with that country.

We hope the better global growth will yield improvements for U.S.-manufactured exports in 2014. Many markets ended the year with manufacturing activity on a positive note. The Markit Eurozone Manufacturing PMI rose from 51.6 in November to 52.7 in December, expanding for the sixth consecutive month and reaching a level not seen since May 2011. While growth in Europe still has much room for improvement, it is clear that its emergence from the continent’s deep two-year recession has had a positive impact on overall sentiment. Likewise, manufacturing activity was generally higher in Asia and the emerging markets, even as the pace of growth in many of these economies eased a bit in December. For instance, the HSBC China Manufacturing PMI decreased from 50.8 to 50.5, but more importantly, activity has now risen modestly in the country for five straight months.

Our two largest trading partners have also made progress in recent months. While the RBC Canadian Manufacturing PMI fell from 55.3 to 53.5, manufacturers in Canada have reported steady improvements in activity since contracting briefly in March. Similar to the United States, the Canadian economy has picked up, with real GDP rising from 1.6 percent at the annual rate in the second quarter to 2.7 percent in the third quarter. Manufacturing capacity utilization rose to 80.5 percent in the third quarter, which was better than the 79.9 percent rate in the second quarter (but still below the 81.7 percent rate one year ago). Meanwhile, manufacturing activity in Mexico has risen for the fifth straight month, with stronger sales and production in December. Nonetheless, Mexican growth continues to climb quite slowly, with real GDP up just 1.6 percent in the second quarter and 1.3 percent in the third quarter.

Legislatively, House and Senate trade champions moved forward this week on new trade promotion authority (TPA) legislation, while trade negotiations in the Asia-Pacific region and with Europe continue to move forward.

Chad Moutray is the chief economist, National Association of Manufacturers.

emerging markets PMI - jan2014

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Cables from Canada: NAM Sister Organization Visits Headquarters

Jay Timmons and Jay Myers, president and CEO of the Canadian Manufacturers and Exporters (CME) meet at NAM Headquarters on November 21, 2013 to discuss the Keystone XL pipeline and North American manufacturing issues.

Jay Timmons and Jay Myers, president and CEO of the Canadian Manufacturers and Exporters (CME) meet at NAM Headquarters on November 21, 2013 to discuss the Keystone XL pipeline and North American manufacturing issues.

Yesterday, Canadian Manufacturers & Exporters (CME) President and CEO Jay Myers visited the National Association of Manufacturers (NAM) headquarters in Washington, DC. CME is NAM’s Canadian sister organization and close partner in promoting the manufacturing agenda across both borders. The NAM Communications office sat down for a brief Q&A with Mr. Myers. Here are a few excerpts from the discussion.

NAM Communications: Can you tell us about the CME and its membership?

Mr. Myers: We are Canada’s largest industry trade association, representing over 10,000 members across Canada. We are Canada’s counterpart to the NAM and our job is to represent the interests of manufacturers operating in Canada, of course many of the companies are headquartered in the United States, which is one reason why we work so close with the NAM.

NAM Communications: Can you tell us about how the CME and the NAM work together in both countries?

Mr. Myers: We’ve had a long-standing relationship with the NAM that continues to grow closer and closer as we deal with energy issues, cross border issues, regulatory cooperation issues, and trade policy. It used to be that the NAM and CME were talking about how to build a free trade environment between the United States and Canada, and now it’s about how we take that great model that we developed here with NAFTA and apply to it grow business around the world, get access to new markets, and make sure we’ve got a competitive energy infrastructure base here in North America.

NAM Communications: What does the Keystone project mean to Canadian manufacturers and to the Canadian economy in General?

Mr. Myers: Keystone is a very strategic issue for the Canadian economy. It’s about the ability to supply oil from Western Canada to not only one of the world’s largest markets, but also to the refineries that have been set up to handle that market on the Gulf Coast. Without Keystone, the oil coming out of Western Canada is kept from entering this major market, and there are really only two other alternatives. In Canada, because we need access to international markets, pipelines will be built east and west. If pipelines are going to the Pacific, the oil may possibly go the West Coast of the United States, but more likely to China. Likewise, pipelines are being built to Eastern Canada, and that oil is going to Europe.  Unfortunately, this issue has become politicized. Clearly, if Keystone is turned down, it’s going to be very difficult to go ahead with any major north-south pipeline. Again, it’s a very important strategic issue for the Canadian economy. I don’t think people truly appreciate the chill that turning down Keystone will put on the Canadian’s economic relationship with the United States. For investment generally, it’s going to be very important that we see that pipeline succeed.

Approval and construction of the Keystone pipeline is a priority for manufacturers, and Mr. Myer’s comments illustrate exactly why this project goes beyond energy security and new jobs. It’s about fostering an environment in which economic growth and continued global competition can take place. As noted by Mr. Myers, denial of the Keystone pipeline would do just the opposite by chilling Canadian and U.S. economic relations.

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Global Manufacturing Economic Update – November 8, 2013

Here is the summary for this month’s Global Manufacturing Economic Update:

The global economy continues to see progress this autumn, with manufacturing activity picking up from recent softness. The JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) increased from 51.8 in September to 52.1 in October, its highest point since May 2011. While this still reflects only modest growth, stabilization in Europe and Asia has helped to lift overall sentiment, new orders and production in many key markets. Moreover, all top 10 export destinations for U.S.-manufactured goods grew on net in October, with a PMI value greater than 50. This was the first time since we began preparing this report that no countries contracted, and it represents a nice turnaround from only two months ago when half of these markets contracted.

This progress can also be seen in much of the underlying data, but with slow growth overall. For example, the Markit Eurozone Manufacturing PMI has shown modest expansion for four consecutive months—a sign that Europe has begun to rebound after its deep two-year recession. Despite the more uplifting news, the European Commission this week slightly lowered its forecast for European real GDP to 1.1 percent growth in 2014, down from an earlier estimate of 1.2 percent growth. France and Greece  both continue to contract, suggesting pockets of weakness are still present. Moreover, recent data on retail sales and employment continue to suggest challenges. The European Central Bank continues to worry about sluggish economic growth and disinflation, and yesterday, it surprised the market by lowering its key interest rate to 0.25 percent. On a more positive note, the prospect of even minimal growth has lifted spirits across the continent, with the ZEW Indicator of Economic Sentiment reflecting increased relative optimism in October.

The story is similar in Canada, throughout Asia and in the emerging markets. The RBC Canadian Manufacturing PMI rose to 55.6 in October, its fastest pace since April 2011. New orders and production have rebounded from softness during the spring and summer. We hope better economic news in Canada—our largest trading partner—will increase demand for our exports there. Likewise, the HSBC China Manufacturing PMI has expanded for three straight months, albeit slowly, up from 50.2 in September to 50.9 in October. Moreover, while economic growth has decelerated over the past few years, real GDP picked up from 7.5 percent in the second quarter to 7.8 percent in the third quarter. Industrial production and fixed asset investments have also been higher in the third quarter, suggesting improvements in overall activity. Furthermore, stabilization in Europe and Asia has helped to buoy most of the emerging markets, with the HSBC Emerging Markets Index up from 50.7 to 51.7.

Nonetheless, growth in U.S.-manufactured goods exports remains frustratingly low so far this year despite modest gains in the economies of our major trading partners. U.S.-manufactured goods exports have risen just 1.8 percent through the first eight months of 2013 relative to the same time period in 2012, using non-seasonally adjusted data. This represents only marginal improvement from July’s 1.6 percent pace, and it presents a challenge in our nation’s ability to double exports by 2015 as outlined in the President’s National Export Initiative. Reduced year-to-date exports to Europe account for much of the slower pace of U.S.-manufactured goods exports, with eased growth rates to many of our other large trading partners as well. However, the recent deceleration in the U.S.–euro exchange rate should help to boost our exports to the EU.

Next week, we will get industrial production data from a number of countries, including the United States. Output is expected to continue to show signs of improvement in the United States and China, but production is predicted to decline somewhat in the Eurozone. Europe is also anticipated to report its second straight month of positive real GDP growth, with third-quarter data similar to the second-quarter growth rate of 0.3 percent.

On the trade front, negotiations continue around the clock on the Trans-Pacific Partnership (TPP) talks, while the Administration, Congress and the business community accelerate efforts to move forward on Trade Promotion Authority (TPA). Manufacturers worked across the Atlantic to support the inclusion of key trade secret issues in the Transatlantic Trade and Investment Partnership (T-TIP) trade discussions as U.S. and EU negotiators prepare to return to the table this month and next to make progress on these negotiations. All eyes turn again toward Bali as the World Trade Organization (WTO) seeks to address trade facilitation and information technology liberalization to cut red tape and unnecessary costs at the border.

Chad Moutray is the chief economist, National Association of Manufacturers.

euro exchange rate - nov2013

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Global Manufacturing Economic Update – October 11, 2013

Here is the summary for this month’s Global Manufacturing Economic Update:

The International Monetary Fund (IMF) slightly downgraded its estimates of worldwide output for this year and next year. The IMF now forecasts global GDP to increase by 2.9 percent this year, down from the 3.2 percent estimate predicted three months ago. The lower figure was mostly attributable to some deceleration in emerging economies in Asia, Russia, Latin America and the Middle East. It also reflects a marginal downgrade in the forecast for the United States—consistent with other recent data—to 1.6 percent and 2.6 percent growth in 2013 and 2014, respectively. This is somewhat below the forecasted ranges stated by the Federal Reserve Board a few weeks ago. Yet, the IMF also acknowledges the current budgetary impasse in Washington, which could reduce growth in the fourth quarter and perhaps beyond. However, the IMF projections assume that “the ongoing shutdown in the federal government will be short-lived and the debt ceiling will be raised on time.”

With the federal government shutdown, U.S. statistical agencies have been unable to release updates to many key economic indicators that we rely on. This includes the release of August’s international trade data that were postponed on Tuesday. Without this information, it is difficult to ascertain whether or not we have begun to gain some traction in increasing manufactured goods exports, which have risen a paltry 1.6 percent through the first seven months of 2013 relative to the same time period in 2012. When the August data are released, we will look for some improvement to that figure.

Many of our largest trading partners have seen progress in their economies of late, which should bode well for increased demand moving forward. While the IMF downgraded its overall forecasts, there were also signs of stabilization in the data for both Europe and China. The IMF now predicts real GDP growth of 1.0 percent in 2014, which would be its first positive annual growth rate since 2011. Europe has suffered from a severe recession for the past few years, but the good news was that the Markit Eurozone Manufacturing Purchasing Managers’ Index (PMI) has shown a gradual expansion every month during the third quarter. Even with some easing in September, new orders, output, utilization and exports continued to grow. However, manufacturers remain hesitant to hire.

In Asia, the Chinese economy has stabilized, but manufacturing activity remains only slightly above neutral. The HSBC China Manufacturing PMI edged marginally higher, up from 50.1 in August to 50.2 in September. This was still an improvement from softness seen from May to July, and in general, the Chinese economy has decelerated relative to past years. The IMF forecasts real GDP growth of 7.6 percent and 7.3 percent in 2013 and 2014, respectively, which is below the 9.3 percent rate in 2011. Yet, recent data suggest an uptick in industrial production, capital spending and retail sales, with exports rising for the first time since March, according to the PMI data. Japan’s economy also continues to make progress, with the Markit/JMMA Japan Manufacturing PMI expanding for the seventh consecutive month. Overall, economies throughout Asia saw some improvements in September, even as a few still have some pressing issues.

Meanwhile, in North America, our two largest trading partners saw their economies moving in opposite directions. After some recent sluggishness, the RBC Canadian Manufacturing PMI increased from 52.1 to 54.2, its fastest pace since June 2012. U.S. exports to Canada have stagnated so far this year, so to the extent that our largest trading partner’s economy has begun to accelerate, that is positive news. At the same time, the Mexican market has begun to stagnate. The HSBC Mexico Manufacturing PMI declined from 50.8 to 50.0, and manufacturing sales and production have slowed considerably since earlier in the year.

On the trade front, last week’s NAM Board resolution calling for swift renewal of Trade Promotion Authority (TPA) positions manufacturers well to lead and advance their trade priorities. While the ongoing government shutdown has affected some talks, the stage is set for an ambitious fall agenda. Negotiations to open Asia-Pacific markets and cut global information technology tariffs may reach critical milestones in the next few months. The NAM is advocating manufacturing priorities in these negotiations and others, while addressing overseas trade barriers and keeping members up to speed on the latest export opportunities.

Chad Moutray is the chief economist, National Association of Manufacturers.

markit global pmi values - oct2013

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Global Manufacturing Economic Update – August 9, 2013

Here is the summary for this month’s Global Manufacturing Economic Update:

Net exports provided a significant drag on second-quarter real GDP in the United States, subtracting 0.81 percentage points from the total figure. While goods exports grew faster in the second quarter than in the first quarter, this was counterbalanced by even stronger growth in goods imports. As such, the data highlight how softer economic growth overseas has slowed U.S. manufacturing activity and exports. Year-to-date manufactured goods exports have grown a stubbornly slow 1.7 percent in the first six months of 2013 relative to the same time period in 2012. This compares to 5.7 percent growth in manufactured goods exports for all of 2012 and the 15 percent growth rate required for the United States to meet its goal of doubling exports by 2015. This sluggish pace has made it difficult for manufacturers to increase the demand for their goods.

The Census Bureau and the Bureau of Economic Analysis reported that the U.S. trade deficit fell sharply from $44.1 billion in May to $34.2 billion in June. This was the lowest monthly deficit since October 2009, and there were increases in goods exports mostly across-the-board. The largest year-to-date gains were in consumer goods, non-automotive capital goods and automotive vehicles and parts segments. More importantly, the new data give a sense that the export picture might be improving, providing further hope that manufacturing activity will be better in the second half of the year.

The global economy will need to stabilize and pick up if the U.S. export market is to continue to improve in the coming months. Of the top 10 markets for U.S.-manufactured goods, five have Purchasing Managers’ Index (PMI) values in July suggesting growth, and the other five are experiencing contractions. As a whole, the JPMorgan Global Manufacturing PMI increased from 50.6 in June to 50.8 in July. The latest data show mixed progress in terms of manufacturing activity. In fact, the Markit Eurozone Manufacturing PMI ended 23 consecutive months of declining activity with slight growth in July, sparking conversations about whether its economic challenges have stabilized or not. In contrast, output and new orders in many emerging markets have decelerated in recent months. Yet, data released this morning on Chinese industrial production suggest that activity might be stabilizing, which could be a positive sign moving forward.

Over the next few weeks, several indicators will give us a better sense of how the world economy is faring. This includes GDP reports for Europe, Japan and Mexico; industrial production data for the United States, Europe, India and Mexico; and retail sales information for the United States, Brazil, Canada and Mexico. In addition, regional Federal Reserve Bank surveys of manufacturers for August will hopefully show continued progress in terms of manufacturing activity in the United States, including progress with new export orders.

Meanwhile, this fall will be busy on the trade policy front. Congress recessed for August without moving major trade legislation, including bills to reauthorize customs and extend the Generalized System of Preferences program that expired on July 31. The coming months may see movement on these bills and a measure to grant the President the Trade Promotion Authority (TPA) necessary to pass trade agreements now under negotiation, including the Trans-Pacific Partnership (TPP). The NAM launched a trade toolkit to coincide with renewed congressional attention to these issues. Over the next few months, we also will continue working to overturn unfair trade practices in India, combat trade secrets theft, advance national export control reform and support a global trade facilitation agreement.

Chad Moutray is the chief economist, National Association of Manufacturers.

manufactured goods exports growth - aug2013

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Global Manufacturing Economic Update – July 12, 2013

The global manufacturing economy is growing, but just barely, with Europe’s recession and China’s slower growth weighing heavily on demand. The JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) was unchanged at 50.6 between May and June, only slightly above the threshold of 50, which signifies expansion in the sector. Of the top 10 markets for U.S.-manufactured goods, five have economies that are growing, and five are contracting. As such, we are seeing worldwide an environment that is not unlike what is occurring in the United States right now, with weakness in new orders, particularly overseas, dragging other measures of manufacturing activity lower.

The U.S. trade deficit widened in May, as imports increased and exports declined. Weaknesses abroad have lessened the demand for U.S. products. So far in 2013, manufactured exports have been growing at an extremely disappointing rate of just 1 percent. This compares to 2012’s 5.5 percent growth, and it is well below the 15 percent increase needed to double exports by 2015. The challenging foreign sales climate is one of the main reasons that we have not seen any substantive momentum among manufacturers in the United States recently on new orders, output and other activity measures. For instance, industrial production for manufacturing has risen only 1.7 percent over the past 12 months, the Institute for Supply Management’s PMI stood at just 50.9 in June, and manufacturers have shed workers in each of the past four months.

Behind these export figures, we see weaknesses in both Europe and Asia. Greece received another bailout earlier in the week, and Portugal’s political turmoil has heightened the risks that it will need more assistance in the near future. Both are yet another reminder that Europe’s problems are far from over. Indeed, the Markit Eurozone Manufacturing PMI has now contracted for 23 straight months. Even with some recent upticks in retail sales and confidence surveys, many key measures remain in negative territory. Meanwhile, the Chinese economy also appears to be decelerating, with real GDP expected to decline from 7.7 percent in the first quarter to 7.5 percent in the second when new data are released Monday. The HSBC China Manufacturing PMI has contracted for two consecutive months. Moreover, this softness has spread to many other Asian nations as well, with the exception of Japan.

Closer to home, our two largest trading partners, Canada and Mexico, have seen their growth rates slow, even as both continue to expand overall. Measures of economic activity have improved in Canada, including employment, retail sales and output. Nonetheless, U.S. exports to Canada have eased during the first six months of 2013 relative to the same time frame in 2012. A similar finding could be made about Mexico, which has seen its real GDP growth rates decelerate more recently and industrial production slow. Fewer exports have helped to drag its HSBC Manufacturing PMI lower in June, with weaker sales and production data.

Much of the focus next week will be on China’s economic releases for real GDP, industrial production and retail sales. With numerous press reports highlighting China’s decelerating growth, the data will be closely watched. We will learn more about Europe’s trade environment, with recent surveys indicating that export levels have declined. Meanwhile, in the United States, there will be key data releases on industrial production, retail sales and housing starts next week.

In the trade policy front, new reports were released from the Office of the U.S. Intellectual Property Enforcement Coordinator on intellectual property (IP) protection and the World Trade Organization (WTO) on rising protectionism. U.S.-India relations took center stage with several high-level government meetings and concerns raised by the NAM, the broader business community and Congress over the need to level the playing field with India. The NAM’s challenge to the Securities and Exchange Commission’s (SEC) conflict minerals disclosure rule moved to oral argument. July brings significant movement on key trade negotiations, including the formal start of U.S.-EU talks and the 18th round of the Trans-Pacific Partnership (TPP) talks. The fifth Strategic and Economic Dialogue (S&ED) with China also took place this week.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Global Manufacturing Economic Update – June 14, 2013

Here is the summary for this month’s Global Manufacturing Economic Update:

The World Bank released a report yesterday that said the global economy appears to be transitioning toward a period of more stable, but slower growth. Some of the worldwide financial risks that existed a year or so ago—namely stemming from Europe—have lessened. Yet, more stability does not necessarily mean rapid growth. The World Bank forecasts global GDP growth of 2.2 percent in 2013, with faster growth of 3.0 percent and 3.3 percent in 2014 and 2015, respectively. These figures represent a modest pullback from earlier predictions, reacting to recent weaknesses in the marketplace. The United States is predicted to grow 2.0 percent this year, with 7.7 percent real GDP growth in China and the Euro area shrinking by 0.6 percent.

The latest data support this analysis. The JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) was somewhat higher, up from 50.4 in April to 50.6 in May. This suggests that the global economy is growing very slowly. The Eurozone showed some improvements, even as the continent remains mired in a recession and its PMI values have stayed below 50 for 22 consecutive months. The Canadian economy also rebounded, with its PMI data shifting from a slight contraction in March to modest growth in May. With Canada as our largest trading partner, increased activity north of the U.S. border will be important for reviving exports. Meanwhile, the Chinese economy, which had seen some progress since October in its production figures, began to slow down, with its PMI declining from 50.4 to 49.2. Several other industrial indicators also reflected some deceleration in activity in China.

Beyond economic indicators, there have been a number of headlines recently about volatility in the global equity markets. Traders appear to be reacting to the expected “tapering” of quantitative easing in the United States, and foreign exchange markets have also moved on interest rate and policy changes worldwide. Illustrating this point, the Dow Jones Industrial Average has shifted by over 122 points on average each day (both up and down) since Memorial Day, with wide swings in other markets, as well. (continue reading…)

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Global Manufacturing Economic Update – February 8, 2013

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.

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