Here is the summary for this week’s Global Manufacturing Economic Update:
Last month, we noted that many of our largest trading partners were experiencing progress in their economies, with improving levels of manufacturing activity and other economic indicators. That trend has mostly continued into February. Some countries, such as China and the United Kingdom, have either weakened or slowed down the pace of growth, whereas new orders were strong enough in Germany to allow its manufacturing sector to start expanding again, albeit quite modestly. While the composition of growth has shifted in the past month, seven of the top 10 markets for U.S.-manufactured goods had Purchasing Managers’ Indices (PMIs) greater than 50—the threshold for expansion—in February, suggesting continued improvement from some of the challenges from last fall. The JPMorgan Global Manufacturing PMI has been greater than 50 for three straight months, even as it eased somewhat in the most recent figure.
The United States is growing modestly, making it one of the brighter spots in world economic markets. The Institute for Supply Management’s most recent report found that new orders rose from 53.1 in January to 54.2 in February, with the principal driver being higher sales. In addition, while real GDP barely grew in the fourth quarter of 2012, the data also show that consumers and businesses increased their spending moderately, helping to lessen the blow of reduced federal defense spending and lower inventory replenishment. Nonetheless, manufacturers continue to worry about the U.S. fiscal situation and sales. Non-petroleum goods exports did not change much in January from their December rates, and the 5.5 percent pace of manufactured goods exports in 2012 was well below the 15.9 percent pace of 2011.
The economic woes in Europe continue to negatively impact manufacturers. Manufactured goods exports were essentially flat last year, with the Eurozone’s recession deepening. Real GDP for the continent fell 0.6 percent in the fourth quarter, its fifth straight quarter of declining output, and the Markit Eurozone Manufacturing PMI has contracted for 16 consecutive months. However, all of Europe is not the same. As noted above, Germany’s economy appears to be stabilizing, while others continue to experience reduced sales, production and hiring. The unsettled election in Italy has exacerbated the Eurozone’s problems, reminding world markets about Italy’s large debt obligations and bringing Europe’s sovereign debt crisis once again back into the public eye.
Over the course of the next two weeks, we will get new data on industrial production for a number of countries around the world. Among the highlights to look for: China’s data should reflect the recent pickup in activity, while U.S. production should recover from the decline in manufacturing production observed in January. On the policy front, the Obama Administration formally announced that the United States would move forward with comprehensive trade negotiations with the European Union (EU) and issued its 2013 Trade Policy Agenda, including new initiatives on trade secret protection and localization barriers to trade.
Chad Moutray is the chief economist, National Association of Manufacturers.