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

The global economy has seen some progress since last fall, but growth remains modest at best. There is also a “two steps forward, one step back” feel to some of the latest data. Six of the top 10 markets for U.S.-manufactured goods expanded in March, according to Markit. This is down from seven last month, but up from four last October. Canada, our largest trading partner, saw its manufacturing activity decline, with weaknesses in new orders, exports and hiring. Softness in the United States and Europe were cited as factors.

The other three markets with contracting sales, output and employment levels were in Europe, with its economic downturn widening. The Markit Eurozone Manufacturing Purchasing Managers’ Index (PMI) fell from 47.9 in February to 46.8 in March. This index has now contracted for 20 straight months, with little hope of improving anytime soon. While many of the recent headlines have surrounded the failure of the banks in Cyprus or the inconclusive Italian elections, the challenges are ones that confront the entire continent. The unemployment rate has risen to 12 percent, with more than one-quarter of the working population in Greece and Spain out of work, and real GDP is expected to contract throughout the year. This morning, we should learn even more about the manufacturing sector in Europe when new data on industrial production will be released. The data are expected to show a slight decline. (continue reading…)

Here is the summary for this week’s Monday Economic Report:

Suddenly, in the midst of decent and cautiously optimistic U.S. growth, world economic markets have begun to focus on the banking crisis in Cyprus. With GDP of around $25 billion, Cyprus has seen its problems once again bring Europe’s sovereign debt challenges to the forefront of economic discussion. Cypriot lawmakers have struggled to find a way to bail out their banking system, particularly after attempts to tax depositors failed. The deal announced over the weekend was negotiated so that Cyprus could remain in the European Union. It was that prospect that has sent equity markets lower last week, particularly in Europe, on fears of how the crisis in Cyprus might spread to other countries.

Of course, Cyprus is not Europe’s only problem. The Eurozone is mired in a prolonged recession. As we have discussed in the monthly Global Manufacturing Economic Update, real GDP and employment continue to decline in the continent, with weaknesses even in Germany, its largest country. The Markit Flash Eurozone Purchasing Managers’ Index (PMI) dropped from 47.8 in February to 46.5 in March. This measure has contracted every month since July 2011. This latest report states that sales, output and hiring were all lower, and the prospects for improvements in April do not look good.

The data stand in contrast to what we are seeing elsewhere. Markit Flash PMI data for China and the United States reflect continuing, albeit modest, growth in manufacturing activity in both countries. In its Federal Open Market Committee (FOMC) statement last week, the Federal Reserve Board noted recent progress in many economic indicators, which had “paused” at the end of last year due to the fiscal cliff and weather-related concerns. Even with these improvements, the Federal Reserve continues to worry about slow economic growth and elevated unemployment rates. As such, it will continue to make purchases of $85 billion in long-term and mortgage-backed securities for the foreseeable future. In the short term, the Federal Reserve will be closely watching the impact of across-the-board budget cuts and the debt ceiling debate, both of which could put a dent in real GDP growth in the second quarter of 2013. (continue reading…)

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.

Here is the summary for this week’s Monday Economic Report:

The Philadelphia Federal Reserve Bank’s Business Outlook Survey continued to show significant weaknesses in the manufacturing sector in its district. There were some areas of progress, including shipments and employment, and respondents were mostly positive about higher activity this year. Yet, the composite index was sharply lower on reduced new orders, dragging the overall sentiment lower. The New York Federal Reserve Bank’s Empire State Manufacturing Survey showed similarly worrisome figures. Meanwhile, although the Conference Board’s Leading Economic Index—which foreshadows future U.S. economic activity—was higher, sluggish hiring and sales growth continued.

Despite these troubling indicators, at least one source reports that manufacturing production is on the upswing. Although the Markit Flash Manufacturing Purchasing Managers’ Index (PMI) for the United States edged slightly lower from 55.8 in January to 55.2 in February, the output measure rose to its highest point since March 2011. Even in this survey, however, the pace of growth for new orders, employment and raw materials prices slowed down somewhat. Nonetheless, the Markit data tend to find that the U.S. economy is growing moderately, despite a number of persistent headwinds. In contrast, Flash PMI data for the Eurozone suggest that its problems are far from over. On the positive side, European exports to the United States and Asia have improved.

Other data points mainly focused on housing and inflation. The residential sector has been one of the faster-growing segments of the U.S. economy over the past year. This has been welcome news for many manufacturers that have been eager for this still-struggling sector to recover. While the headline number for housing starts was lower in January, this was mainly due to decreases of multifamily starts, which have risen significantly year-over-year even with last month’s decline. New single-family residential construction rose to its highest point since July 2008, and we have seen single-family starts rise 20 percent over the past 12 months. Permits have also been on a long-term upward trend.

Regarding prices, consumers and manufacturers have benefited from an easing in inflationary pressures over the course of the past year, mainly due to falling energy costs. Price increases have been modest overall, with core inflation at both the consumer and producer level below the Federal Reserve Board’s goal of 2 percent. In January, consumer food prices were higher, particularly for fruits and vegetables, but gasoline prices were lower. However, the recent rise in crude petroleum prices could lead to higher prices for finished energy and other goods in coming months if these are sustained. But, the forecast continues to be for moderate inflation.

This week, there will be several reports released on the current state of manufacturing. On Friday, the Institute for Supply Management will release its PMI report, and it is expected to show the sector growing slowing, with data not much different than the month before and possibly reflecting some pullbacks in activity. This would be in contrast to the Markit data, but it would be consistent with some of the regional studies. There will be regional sentiment surveys released from the Chicago, Dallas, Kansas City and Richmond Federal Reserve Banks this week. Other highlights include new releases on construction spending, consumer confidence, durable goods orders, personal income and a revision to fourth-quarter 2012 real GDP. Given recent data that have come out, look for real GDP to be revised higher, up from the earlier estimate of -0.1 percent to around 0.5 percent, according to consensus forecasts.

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

Markit said that manufacturing activity in February continued to expand, but the pace of new orders slowed somewhat from January. The Flash Manufacturing Purchasing Managers’ Index (PMI) for the United States declined from 55.8 to 55.2, suggesting a marginal change in the overall picture. The good news is that output appears to be recovering strongly, up from 56.8 to 58.1. Five months ago, the output index stood at 51.2, illustrating the improvements seen since then. Moreover, February’s output figure is the highest that it has been since March 2011.

The pace of growth for new orders, employment, and input prices eased a bit. These numbers – particularly sales – helped bring the composite index down for the month, even with higher output. The index for new orders dropped from 57.4 to 56.4. While U.S. sales continued to rise, new export orders contracted once more, reversing two months of modest gains and reflecting continuing weaknesses abroad, especially in Europe (see below). Meanwhile, hiring and raw material prices expanded in February, with each at their slowest pace of the last few months.

Markit Chief Economist Chris Williamson said, “Employment rose in February, but the rate of job creation slowed and remained weaker than policymakers would like to see.” He went on to say: “While the survey … paints an encouraging picture of the manufacturing sector, helping to drive a return to growth for the economy as a whole in the first quarter of this year, firms still need to see greater confidence in the longer-term economic outlook for employment numbers to pick up again.”

This improving – but still cautious – economic outlook in the U.S. stands in contrast to what we continue to see in Europe. The Markit Flash Eurozone Manufacturing PMI was essentially unchanged, down from 47.9 in January to 47.8 in February. While this index has improved from the 44.1 figure observed in August, it continues to reflect a challenging environment for businesses on the continent. The PMI has shown contracting levels since August 2011, or for 19 straight months.

Despite the persistent bad news, the rate of decline for new orders slowed in February in the manufacturing sector. One positive to report was an expansion in new export orders, up from 48.8 to 51.7, the first increase in export sales since June 2011. The Markit report attributed this to increased exports to Asia and the U.S., with strength particularly seen in Germany.

Along those lines, the Flash German Manufacturing PMI shifted from a slight contraction (49.8) to a slight expansion (50.1) for the month. As noted in the Eurozone release, the main driver of the higher index reading was stronger growth in sales, both domestic and foreign. The new orders index rose from 48.5 to 52.7; while the new export orders index increased from 48.2 to 54.6. The jump in sales slowed the decline in employment, at least for February, which was a good sign.

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

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.

Here is a summary of this week’s Monday Economic Report:

Several economic variables pertaining to manufacturing continue to show weaknesses in the marketplace, despite the fiscal cliff compromise reached earlier this month. In December, our NAM/IndustryWeek survey showed that uncertainty due to the fiscal cliff had forced firms on average to pull back on hiring and capital spending, and this trend appears to be continuing—at least for now. Over the course of the past two weeks, there have been four regional Federal Reserve Bank manufacturing surveys (Kansas City, New York, Philadelphia and Richmond), each showing contraction in their January reports. The nation’s fiscal challenges—and the concern over how Washington will deal with them—remain on business leaders’ minds.

However, manufacturers continue to be mostly positive about improved activity in 2013, even if their optimism has diminished somewhat over the past few months. For instance, the four regional Fed surveys anticipate higher sales and production over the next six months, with employment and investment also increasing, albeit more slowly. Other data points also indicate possible gains in the months ahead. Markit’s Flash Manufacturing Purchasing Managers’ Index (PMI) bucked the other surveys by rising from 54.2 in December to 56.1 in January. Strong gains in new orders and output fueled the increase. Meanwhile, the Conference Board’s Leading Economic Index rose 0.5 percent in December (although this forward-looking measure’s gains benefitted mostly from non-manufacturing variables).

Increased building permits contributed positively to the Leading Economic Index. Housing, in general, continues to be a bright spot, despite some of December’s numbers being weaker than November’s. Both existing and new home sales data declined in December. In each case, however, the longer-term trend reflects a significant turnaround in the sector. Existing home sales rose 12.8 percent in 2012, and new single-family home sales were up 8.8 percent for the year.

This week, we will be closely following a number of economic releases. On the employment front, I anticipate non-farm payrolls will rise at roughly the same rate as last month, up around 150,000 or so, with manufacturing hiring increasing more modestly. We will also get our first glimpse of real GDP growth for the last quarter of 2012, with my estimate being around 1.8 percent. The other big news of the week will be the Federal Open Market Committee (FOMC) meeting. While it will have new voting members this year, it is widely expected to continue its accommodative policies in an attempt to stimulate growth. Other data highlights for the week include regional manufacturing surveys from the Chicago and Dallas Federal Reserve Banks and new data on durable goods orders, consumer confidence, personal spending and construction activity.

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

Contrasting with several other recent reports, Markit announced that overall manufacturing activity picked up in January. The Flash Purchasing Managers’ Index (PMI) rose from 54.2 in December to 56.1 in January. It was the third month in a row of consecutive gains in the index, with stronger sales pushing sentiment higher.

The index for new orders increased from 54.7 to 57.7, the fastest pace since December 2011. Export orders were not as strong (down from 52.8 to 51.3), but were not contracting as they were just two months ago.

Other measures were also positive. Both output and employment were growing at a faster pace. Inventories were mixed, with raw material supplies growing again, after shrinking for five straight months, as well as finished goods contracting which was nearly unchanged from the month before). Meanwhile, pricing pressures remain modest.

Overall, the Markit PMI data show that manufacturers have begun the new year with more optimism than in previous months. It is notable that the Markit data vary from other sources, including the Institute of Supply Management’s PMI data, in that its index never fell below 50 – the threshold for contracting levels of activity. Nonetheless, the upward momentum seen in the Markit data should bode well for improvements in the ISM PMI data, which is scheduled to be released on February 1. (continue reading…)

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

While much of the focus of late has been on the fiscal cliff, manufacturers have also been worried about slowing global sales. Business leaders have said that increasing their exports has been a struggle. Yet, despite these headwinds, year-to-date growth in U.S.-manufactured goods has risen almost 5 percent. The good news is that this figure represents positive growth, but it also shows significant easing from the same time period last year. Much of the deceleration in exports corresponded with challenging economic environments in a number of countries, going beyond Europe’s struggles to include Brazil, China, Japan and elsewhere.

The latest data indicate that the global economy appears to be strengthening, which should bode well for improving international trade this year. Europe and Japan are exceptions as both continue to experience significant weaknesses in their respective markets. The purchasing managers’ indices (PMIs) for both remain negative, with new orders, production and employment contracting. Political and economic uncertainties permeate these data, with manufacturers uncertain about what  the future holds. Elsewhere, the trends are more positive. Seven of the top 10 markets for U.S.-manufactured goods have economies that are growing—a definite improvement from three months ago when just four of them did. As a result, we are seeing pickups in manufacturing activity and business confidence. This does not mean that these economies are growing strongly, but it does suggest that global trends have stabilized and are moving in the right direction.

Ironically, the political battles over U.S. fiscal policy had implications beyond our borders, with concerns about a possible economic downturn a top concern among our trading partners. This was especially the case for Canada, our largest trading partner, but other nations fretted about our fiscal situation, as well. With a deal to avert the fiscal cliff, at least some of these anxieties will go away for now. However, there are still larger concerns about the long-term fiscal health of the United States, and possible battles over raising the debt ceiling will keep these issues front and center. Nonetheless, the United States is now poised for modest growth in 2013, with rising exports a major contributor both to our macroeconomic picture and to manufacturers’ business plans.

Next week, we will receive data on November’s U.S. trade balance. The previous month saw a widening of the trade deficit, with both exports and imports lower. Hopefully, a slowly improving global economy will help to turn that around. Globally, we will get the latest industrial production and retail sales data from a number of European countries, with the European Central Bank meeting to discuss its monetary policy plans for the first time in 2013. Trade data will also be released for China, as well as indices for consumer and producer prices. The larger number to watch from the Chinese perspective will be real GDP growth, which will be out on Wednesday, January 16, and is expected to show an increase of 7.7 percent.

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

Below is the summary from this month’s Global Manufacturing Economic Update:

The global economy remains fragile, but there have been some positive signs during the past month. China’s economy began to expand (albeit marginally) for the first time in 13 months, with overall activity accelerating. Other countries also improved last month, even if some of them continue to have a Purchasing Managers’ Index (PMI) value below 50—the threshold for contraction. The JPMorgan Global Manufacturing PMI rose from 48.8 to 49.7, or near neutral in terms of manufacturing behavior. Sales and employment appear to have stabilized even in Europe, which remains mired in fiscal and economic challenges. The Eurozone is in a recession, with real GDP lower in two consecutive quarters (down by 0.1 percent in the third quarter), but several countries saw improvements.

At the same time, the North American market appears to be decelerating. Other nations are concerned about our nation’s ability to avert the fiscal cliff. This is especially true with our closest trading partners in North America. Canada and Mexico continue to expand, but at a slower pace. Real GDP in Canada eased to 0.6 percent growth during the third quarter, and its PMI dropped from 51.4 to 50.4. In Mexico, real GDP also weakened, decelerating to 4.4 percent, with the slower pace largely the result of weakening demand for manufacturing exports. Of course, the dominant player in North America is the United States, and worries about the fiscal cliff and softer new orders have negatively impacted industrial production and business confidence. Hurricane Sandy also has been a factor. The latest NAM/IndustryWeek Survey of Manufacturers illustrates how diminished optimism has reduced hiring and capital spending plans.

Despite major headwinds, U.S. exports continue to be a strength for the macroeconomy and for manufacturers. Net exports provided a positive contribution to real GDP growth during the third quarter, and year-to-date manufactured goods exports through September were 6.1 percent higher relative to the same time period in 2011 on a non-seasonally-adjusted basis. While this represents a significant slowdown, it is nonetheless impressive given global weaknesses. Moreover, more than 40 percent of manufacturers in the NAM/IndustryWeek survey said that increasing international sales was a primary driver of growth for their businesses, and those firms that expected growing exports were more optimistic in their outlook than those that were not.

Next week, the Commerce Department will release new international trade data. The October trade balance is not expected to change dramatically, but we will be looking for indications of continued modest growth in U.S.-manufactured goods exports. Other highlights will be updates on industrial production in a number of European countries and the United States. On the policy front, Congress has now ensured manufacturers can get the full benefits of Russia’s accession to the World Trade Organization (WTO), Trans-Pacific Partnership (TPP) talks are moving forward, trade talks with the European Union (EU) are still under discussion, Ukraine is seeking to raise tariffs and U.S. investment treaty talks are heating up.

Chad Moutray is chief economist, National Association of Manufacturers.