Tag: exports

Growth in Chinese and European Manufacturing Activity Slowed in August, While U.S. Was Up Sharply

Given the contraction seen in the Eurozone economy in the second quarter, analysts were eagerly anticipating the preliminary Markit Purchasing Managers’ Index (PMI) data released this morning. Indeed, the HSBC Flash Eurozone Manufacturing PMI decelerated from 51.8 in July to 50.8 in August, suggesting that growth in manufacturing activity on the continent has slowed to a crawl. Germany (down from 52.4 to 52.0) eased slightly, but with output falling to its slowest pace since June 2013. French manufacturers (down from 47.8 to 46.5) continue to struggle, with its Flash Manufacturing PMI contracting for the fourth straight month and new orders declining at their quickest pace since in 16 months.

For the Eurozone as a whole, manufacturing activity was slower across-the-board. New orders (down from 52.1 to 51.0), output (down from 52.7 to 50.9), exports (down from 52.6 to 52.1) and employment (down from 49.9 to 49.1) were all lower in August, with the latter contracting for the second consecutive month. Production growth was at its weakest point since Europe emerged from its deep recession 13 months ago. In essence, the good news was that European manufacturing activity did not contract in August, but it is clear that demand and output are moving in the wrong direction. These data will continue to be fodder for those looking for economic stimulus in the months ahead.

Meanwhile, the HSBC Flash China Manufacturing PMI was also much softer for the month, down from 51.7 in July to 50.3 in August. As such, manufacturing expanded for the third straight month, but only barely so. New orders (down from 53.3 to 51.3), output (down from 52.8 to 51.3) and export sales (down from 52.6 to 51.4) downshifted from a modest pace to slower growth, and employment (down from 49.4 to 48.2) deteriorated further. In fact, hiring has been negative in 16 of the past 17 months. While China has begun to stabilize its economy after weaknesses earlier in the year, these data show that there remains room for improvement.

Japan’s economy contracted in the second quarter, falling 1.7 percent in the second quarter or 6.8 percent year-over-year. Yet, the Markit/JMMA Flash Japan Manufacturing PMI (up from 50.5 to 52.4) seem to indicate that manufacturers are in a better mood, with a pickup seen in demand and output. This was the fastest pace since March, or before the imposition of a new tax in April that sent the economy lower. The underlying data were mostly higher, including sales (up from 51.2 to 54.4), production (up from 49.8 to 53.2), exports (up from 50.8 to 53.0) and hiring (up from 50.2 to 51.1).

Closer to home, the Markit Flash U.S. Manufacturing PMI was up sharply, up from 55.8 to 58.0. This was the highest level for manufacturing activity in the U.S. since April 2010. Both new orders (up from 59.5 to 60.8) and output (up from 59.7 to 60.2) were above 60, suggesting strong growth and closely mirroring similar data from the Institute for Supply Management (ISM). New export orders (up from 50.3 to 54.4) and employment (up from 51.2 to 54.6) were both higher, as well, with each recording modest expansions. Overall, these data were quite positive, indicating that the recent rebound in manufacturing activity in the U.S. (after softness in the early months of 2014) has begun to take hold.

Flash data give us an advance estimate of manufacturing activity incorporating “approximately 85% of the usual monthly survey replies,” with the final PMI data for the month released in early September.

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

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Kansas City Fed: Manufacturing Activity Expanded for the Seventh Straight Month in July

The Kansas City Federal Reserve Bank said that manufacturing activity has expanded every month so far in 2014, picking up slightly in July from June. The composite index of general business conditions rose from 6 in June to 9 in July. The pace of growth accelerated in many of the key indicators, including new orders (up from 8 to 12), production (up from 2 to 11), shipments (up from 2 to 14) and employment (up from 1 to 8). One-third of survey respondents said that their production had increased in the month.

There were two negatives in the report, as well. The average workweek (down from 7 to -3) shifted into its first contraction in six months. The percentage of those taking the survey who noted a reduced workweek increased from 12 percent in June to 17 percent in July, enough to tip the diffusion index. In addition, new export orders (up from -11 to -6) continued to fall, albeit at a slower pace of decline for the month. This measure has been in contraction territory in 8 of the past 12 months, indicating weakness on the trade front in the Kansas City Fed’s district.

Nonetheless, there continue to be encouraging signs for the months ahead. The forward-looking composite index increased from 12 to 15, with relatively strong growth anticipated over the next six months. Manufacturers in the region expect higher new orders (up from 14 to 24), production (up from 17 to 23), shipments (up from 20 to 28), employment (up from 14 to 23) and capital expenditures (up from 23 to 25) at rather healthy rates of growth. In fact, over 40 percent predict increased sales, output and shipments, with more than one-third seeing additional hiring and capital spending. Yet, the sample comments also suggest frustrations with attracting qualified workers. Exports are predicted to grow just modestly (unchanged at 6).

Respondents expect pricing pressures to remain elevated, with nearly half of those taking the survey saying that raw material prices should increase over the next six months. Still, 24 percent felt that input costs for them might fall, and the diffusion index for this measure (down from 49 to 46) eased slightly in July.

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

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Continued Progress in China and the U.S., with Europe and Japan Growing More Modestly

The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) expanded for the second straight month in July, rebounding from softness from January through May. The headline index rose from 50.7 in June to 52.0 in July, its highest level since March 2011. The underlying data were mostly higher, including new orders (up from 51.8 to 53.7), output (up from 51.8 to 52.8) and exports (up from 50.6 to 52.7). The sales pace was the fastest since January 2011, and each of these measures are a sign that recent stimulative actions taken by the Chinese government have had a positive impact. Some downsides in the PMI survey contracting hiring rates for the 16th consecutive month (up from 48.7 to 49.5) and slightly accelerated raw material prices (up from 50.8 to 52.9).

Meanwhile, Japanese manufacturing activity also expanded for the second straight month, but it eased slightly in July. The Markit/JMMA Flash Japan Manufacturing PMI declined from 51.5 to 50.8. The recent uptick in activity has materialized as the Japanese economy has recovered from an increased in taxes that went into effect on April 1st. Still, manufacturers in the country cannot cheer yet, as output growth came to a halt in July (down from 51.8 to 50.0, or neutral). Other indicators were mixed. Export sales (up from 49.0 to 51.6) and employment (up from 49.8 to 50.8) both shifted to positive growth, but the pace of new orders decelerated somewhat (down from 52.0 to 51.1).

In other news, the Markit Flash Eurozone Manufacturing PMI edged marginally higher, up from 51.8 to 51.9. The Flash Eurozone PMI Composite PMI was up more strongly, increasing from 52.8 to 54.0, suggesting healthier growth in the service sector. For manufacturers, the data suggest slightly faster growth in production (up from 52.8 to 53.0) and exports (up from 52.4 to 52.7), but the pace of growth for new orders (51.9) and employment (50.3) were unchanged.

Overall, these figures provide a limited degree of encouragement for the manufacturing sector in Europe, which has worried of late about slow economic and income growth. It is also still clear that the data vary on country-by-country basis, with German manufacturing activity (up from 52.0 to 52.9) accelerating in July but with French manufacturers noting yet another deterioration in sales and output. Indeed, the French economy remains in a rut, with manufacturing activity positive in just three months since January 2013.

Closer to home, the Markit Flash U.S. Manufacturing PMI decreased from 57.3 to 56.3. Despite the slight easing in July, manufacturing activity continues to grow at relatively decent rates. Through the first seven months of 2014, the top-line index has averaged 55.9, stronger than the 53.5 average noted for 2013 as a whole. The July data show both new orders (down from 61.7 to 59.8) and output (down from 61.0 to 60.4) growing at a healthy paces, albeit with some deceleration for the month. Yet, hiring growth remains more modest (down from 53.8 to 52.1) and export sales (down from 50.9 to 50.6) were just barely growing, suggesting that there remains room for improvement.

Flash data give us an advance estimate of manufacturing activity incorporating “approximately 85% of the usual monthly survey replies,” with the final PMI data for the month released on August 1.

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

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Kansas City Fed: Manufacturing Activity Expanded at a Slower Rate in June

The Kansas City Federal Reserve Bank said that manufacturing activity expanded at a slower rate in June; nonetheless, growth was positive for the sixth straight month. The composite index of general business activity fell from 10 in May to 6 in June. Several indicators eased for the month, including production (down from 14 to 2), shipments (down from 5 to 2), new orders (down from 11 to 8) and the average workweek (down from 14 to 7). To illustrate this, 34 percent of respondents said that their production had increased In June, down from 40 percent in May.

The largest negative in the report was exports (down from 6 to -11), with 16 percent of those taking the survey suggesting that their international sales had fallen in June. In addition, hiring (down from 10 to 1) slowed to a crawl, with 23 percent suggesting that they had added employees but 17 percent noting declines.

Still, there continue to be some encouraging signs for the months ahead, albeit with somewhat weaker sentiment than earlier data. The forward-looking composite index has edged down from 21 in April to 13 in May to 12 in June. Yet, at least 35 percent of survey respondents anticipate sales, shipments, and output to be higher six months from now, and 28 percent plan to add workers. Capital spending (up from 19 to 23) was expected to pick up slightly. Pricing pressures declined a bit for the month, but remain elevated with 48 percent of survey-takers anticipating increased raw material costs ahead.

Several of the sample comments noted workforce challenges. As one manufacturer put it, “It is not so much a question of short supply of workers, but rather a question of workers who are reliable and possess a strong work ethic.” Others noted the limited availability of possible employees with the right skills in their community and challenges with competition for workers in terms of compensation.

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

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Global Manufacturing Economic Update – June 13, 2014

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

Global growth has been slower than desired in the early months of 2014, and as a result, we have seen many analysts—including me—downgrade their forecasts for this year. Indeed, the latest World Bank’s Global Economic Prospects now predicts global GDP growth of 2.8 percent for the year, down from the 3.2 percent forecast in January. Much of that stems from softer growth in the first half of this year in the United States and decelerated activity in the emerging markets. Brazil, Russia and China experienced contracting manufacturing activity levels in May, with only India experiencing modest growth.

The good news is that the global economy is anticipated to pick up in the second half of this year, continuing into next year. The World Bank estimates real GDP growth of 3.4 percent in 2015, with the U.S. economy expanding by 3.0 percent. This would be consistent with the relatively upbeat outlook seen in the most recent National Association of Manufacturers (NAM)/IndustryWeek Survey of Manufacturers. Still, there continue to be threats to growth that could dampen these predictions, including deflationary risks in Europe, tighter monetary policies in the United States and a number of geopolitical struggles. For example, crude oil prices have risen sharply in the past few days to around $107 a barrel this morning because of confrontations in Iraq and worries about energy supplies.

In general, manufacturing activity worldwide continues to expand modestly, but at varying paces across a number of nations. The JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) increased slightly, up from 51.9 in April to 52.2 in May. Yet, 5 of the top 10 markets for U.S.-manufactured goods had declining levels of activity for the month, up from two in March and zero in December. China tops this list, having experienced its fifth consecutive monthly contraction despite some easing in the pace of the monthly decline. Three of the other four countries with contractions were also in Asia, including Hong Kong, Japan and South Korea. Meanwhile, Brazil has now contracted for two straight months, which is perhaps not the way it wanted to kick off the World Cup. At the other end of the spectrum, we continue to see strong growth in the United Kingdom and the United States, both of which saw heavy production gains in May.

Meanwhile, European economies continue to experience slight expansions, but growth eased in May. The Markit Eurozone Manufacturing PMI decreased from 53.4 to 52.2, its slowest pace since November but the 11th straight month for expanding levels of activity. This resulted from a deceleration in new orders, output, exports and hiring. Nonetheless, growth in the Eurozone remains subpar, with real GDP up just 0.2 percent in the first quarter and expected to increase around 1 percent in 2014 as a whole. Still, retail sales have increased in each of the first four months of 2014, and industrial production increased at its fastest pace since November.

Yet, the big worry in Europe continues to be deflation. Producer prices fell 0.1 percent in the Eurozone in April, with declines of 1.2 percent year-over-year. At the same time, annual inflation has fallen to 0.5 percent. Fears about deflation and slow growth have prompted the European Central Bank (ECB) to take actions to further stimulate the Eurozone economy at its June 5 meeting, cutting its main interest rate to 0.15 percent. In essence, the ECB will charge negative interest rates on bank deposits in an effort to spur institutions to lend more, and there is some speculation that it might pursue a more aggressive asset purchasing program in the future, if needed.

On the policy front, there is an increased focus from both a business and policy perspective on India, with its election of a new prime minister, and Europe, which also elected a new parliament and is constituting a new commission. Trade negotiations in the Asia-Pacific and Europe continue, but work needs to be done on both. Domestically, there is a heavy U.S. focus on the reauthorization of the Export-Import Bank before its expiration on September 30 and passage of a new Miscellaneous Tariff Bill, which has lagged more than 17 months, as well as new legislation on trade secrets.

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

brazilian GDP - jun2014

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Markit: U.S. Manufacturing Output Growth Rose in May to Fastest Pace since February 2011

The Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) rose from 55.4 in April to 56.2 in May. The increase in May stemmed largely from an increase in production, with the output index up from 58.2 to 59.6. That was the fastest pace for output growth since February 2011, and it suggests that manufacturers in the U.S. have rebounded from weather-related softness earlier in the year. The index for production had declined to 53.4 in January and has risen each month since.

Other data points were mixed. New orders (down from 58.9 to 58.2) and export sales (down from 51.9 to 51. 5) were both lower, but these figures also suggest relatively strong demand overall, particularly domestically. The pace of hiring was also slightly lower (down from 53.8 to 53.5). Yet, employment continues to grow modestly, with the index averaging 53.7 year-to-date in 2014, up slightly from 52.9 in 2013.

Pricing pressures have picked up a bit in May, with the index for input prices rising from 53.5 to 56.3. This was the highest level for the raw materials index since January, and it mirrors other recent data that have shown producer prices accelerating somewhat, particularly for food items.

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

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Chinese Manufacturing Sales and Output Turned Slightly Positive in May

The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) reported some degree of progress in May, particularly for sales demand and production. The headline PMI figure moved slightly higher, up from 48.1 in April to 49.7 in May. On the one hand, it suggests that overall manufacturing sentiment continues to contract, with PMI values below 50 for five straight months. Yet, the pace of the decline appears to be slowing, which could be a sign of stabilization for the market. Indeed, new orders (up from 47.7 to 50.2), export sales (up from 49.3 to 52.7), and output (up from 48.0 to 50.3) all turned positive for the month, which is good news. Still, hiring continued to decelerate (down from 48.6 to 47.3), and as the press release states, “downside risks to growth remain.”

Meanwhile, the Markit/JMMA Flash Japan Manufacturing PMI rose from 49.4 to 49.9, indicating that the Japanese economy has now contracted for the second straight month. Much of this stems from a tax increase that went into effect on April 1st, with the soft export market also a factor. New orders (up from 47.4 to 49.4), production (up from 46.2 to 49.2), and exports (down from 49.1 to 48.2) continued to shrink in May, even as there was some progress. Still, it is noteworthy that May’s PMI figure was nearly at the neutral rate, suggesting that there might be some stabilization occurring, much like we saw in the Chinese data.

In other news, the Markit Flash Eurozone Manufacturing PMI declined from 53.4 to 52.5. New orders (down from 53.9 to 52.9), output (down from 56.5 to 54.7), and exports (down from 53.6 to 52.8) have all decelerated somewhat in May, with the pace of production growth at its lowest level since December. Hiring (down from 51.3 to 50.8) remains positive, with small net increases for the fifth straight month.

Even with the slight easing, Europe’s PMI values for the sector have averaged modest growth with 53.2 so far in 2014, a welcome improvement from the contractionary environment pervasive during the deep two-year recession. One of the more closely watched variables is input prices, particularly with recent deflationary worries as stated by the European Central Bank. Raw material costs did continue to fall for the third straight month, but the rate of decline slowed (up from 45.2 to 48.6).

The Flash data for both France and Germany were also somewhat softer in May. Germany’s PMI for manufacturers dropped from 54.1 to 52.9. It is down from its recent peak (a 2½-year high) of 56.3 in January. At the same time, France’s manufacturing sentiment moved back into a slight contraction (down from 51.2 to 49.3), ending two months in positive territory, with activity down mostly across-the-board.

Flash data give us an advance estimate of manufacturing activity incorporating “approximately 85% of the usual monthly survey replies,” with the final PMI data for the month released in early June. This month marks the premier of preliminary data for Japan.

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

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ISM: Manufacturing Sentiment Picked Up Again in April

The Institute for Supply Management’s (ISM) manufacturing purchasing managers’ index (PMI) continued to move higher, recovering from weather-related softness in January. The overall PMI rose from 53.7 in March to 54.9 in April, its highest point so far in 2014. The sector continued to see modest growth in new orders (unchanged at 55.1), production (down slightly from 55.9 to 55.7), and exports (up from 55.5 to 57.0). One real positive was the increased pace of hiring, with the employment index jumping from 51.1 to 54.7.

The sample comments support the view that manufacturing activity has rebounded in the spring months. A fabricated metal products respondent said, “We think there is pent-up demand waiting for weather to break.” Several others focused on improvements in sales, employment, and export growth. Yet, the survey participants also noted some challenges, including difficulties hiring skilled workers, weak demand from Europe, and worries stemming from political turmoil in Russia and the Ukraine.

Overall, manufacturing confidence is rising, building off of uncertainties earlier in the year. Still, it is important to note that activity remains below the torrid pace seen at the end of last year. The ISM PMI values averaged 56.3 in the second half of 2013, with new orders and output averaging 61.8 and 62.6, respectively. As such, there is still room for improvement. Fortunately, manufacturing demand and production appear to be moving back in the right direction.

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


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China’s Manufacturing Sector Contracted for the 4th Straight Month; U.S. and Europe Strengthened

Chinese manufacturing activity contracted for the fourth straight month. Yet, the pace of the decline slowed, with the HSBC Flash Manufacturing Purchasing Managers’ Index (PMI) up from 48.0 in March to 48.3 in April. The data largely mirrored the recent deceleration seen in other economic indicators, including China’s real GDP falling from an annualized 7.7 percent in the fourth quarter of 2013 to 7.4 percent in the first quarter of 2014.

Despite the weaknesses, one could put a positive spin on the slightly better – but still contracting – levels of new orders (up from 46.9 to 47.7) and output (up from 47.3 to 48.0). On the other hand, employment (down from 49.3 to 48.6) and export sales (down from 51.4 to 49.3). Exports have now contracted in four of the past six months, which have no doubt negatively impacted overall manufacturing sentiment.

Meanwhile, the latest reports reflect renewed strengths in both Europe and the United States. While the Markit Flash U.S. Manufacturing PMI edged marginally lower (down from 55.5 to 55.4), production growth (up from 57.5 to 58.2) was at its highest level since March 2011. This was a sign that the sector has begun to move beyond the weather-related slowdowns observed earlier in the year. New orders (up from 58.1 to 58.9) and exports (up from 51.0 to 51.9) have also rebounded. Hiring eased a bit (down from 53.9 to 53.8), but still reflected modest growth.

At the same time, the Markit Flash Eurozone PMI increased from 53.0 to 53.3. This was the tenth consecutive monthly expansion on the continent for manufacturing activity. The higher figure in April was largely the result of the jump in output (up from 55.4 to 56.5), which was only barely below the three-year peak of 56.7 seen in January. Likewise, hiring also strengthened (up from 50.3 to 51.3), its highest point since September 2011.

Nonetheless, sales growth moderated slightly (down from 54.4 to 53.9), with exports unchanged (53.6). The good news was that both still reflected modest gains, and the recent gains in demand and production in Europe have helped to lift spirits, particularly given the severity of the two-year recession.

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

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Manufacturers Testify Before House Ex-Im Panel

Yesterday, manufacturers like Boeing and FirmGreen participated in a panel hosted by House Financial Services Committee Ranking Member Maxine Waters (D-CA) to highlight the critical importance of reauthorizing the U.S. Export-Import (Ex-Im) Bank. Ex-Im Bank faces a tough reauthorization fight in Congress this year.

Manufacturers, especially small and medium-sized manufacturers, cannot afford a lapse in the financing support that helps them stay competitive in the global marketplace. Most of the Bank’s financing deals help small businesses, Ex-Im Chairman and President Fred Hochberg told the panel. Hochberg spoke with the NAM’s Member Focus magazine last year about efforts to help businesses of all sizes.

Unfortunately, manufacturers are already facing the consequences of the uncertainty surrounding Ex-Im’s reauthorization. FirmGreen CEO Steve Wilburn told lawmakers that his company lost a $57 million contract to a South Korean competitor because reauthorization legislation faces an uncertain future in Congress. “I just want you to understand the impact on people in my company, me personally and the people in the Midwest that I can’t give those jobs to,” he said. “To me, it’s unconscionable that we allow this debate to rage on a partisan basis.”

Ted Austell, Boeing’s vice president of executive, legislative and regulatory affairs, said that Ex-Im supports the company’s 160,000 employees, 15,000 suppliers and vendors, and hundreds of thousands of workers connected to the aerospace sector. “In a word, it’s jobs,” he said.

House Democratic Whip Steny Hoyer (MD) addressed the panel yesterday afternoon, and he indicated that he will make Ex-Im a legislative priority. The NAM appreciated Rep. Hoyer’s outstanding leadership during the last reauthorization of Ex-Im, and we are very pleased that he continues to make this issue a priority. It is a critical tool that allows our small, medium and larger manufacturers to compete globally. Rep. Hoyer announced at a press conference earlier today that he is including Ex-Im Bank reauthorization in his manufacturing initiative.

This evening, Rep. Denny Heck (D-WA) and other members of the New Democrat Coalition will take to the House floor to discuss the Ex-Im Bank’s positive impact on American jobs during a “special order.” You can follow along with the New Dems on Twitter here.

The NAM will continue to advocate for Ex-Im Bank’s reauthorization on Capitol Hill and with the Administration. In March, we spearheaded a letter that was joined by more than a dozen other business leaders to urge the Senate Banking, Housing and Urban Affairs Committee and the House Financial Services Committee to take immediate action on legislation. We’re also engaging our members to add their voices and influence. Click here to learn more about what manufacturers can do today.

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