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Global Manufacturing Economic Update – February 13, 2015

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Here are the files for this month’s Global Manufacturing Economic Update:

Let’s start with some good news. U.S.-manufactured goods exports reached an all-time high in 2014, surpassing $1.4 trillion for the first time, according to Trade Stats Express. Moreover, goods exports from manufacturers grew 1.9 percent in 2014, with exports to the top five markets higher for the year. At the same time, export growth decelerated from the 5.8 percent and 2.6 percent rates of 2012 and 2013, respectively. Sluggish growth abroad and a strengthened U.S. dollar continue to challenge demand. In December, the U.S. trade deficit widened to its highest level of 2014, and the average monthly deficit for the year exceeded that of 2013 ($42.09 billion per month versus $39.70 billion, respectively). Read More

Global Manufacturing Economic Update – January 9, 2015

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

The minutes of the Federal Open Market Committee’s December 16–17 meeting continue to reflect increased optimism about the U.S. economy, with relative strength in both output and labor markets. Federal Reserve participants expect U.S. real GDP growth of 2.6 to 3.0 percent in 2015, with the unemployment rate falling to 5.2 to 5.3 percent and core inflation remaining below its stated goal of 2.0 percent. At the same time, they expressed worries that global economic challenges might dampen growth here. Specifically, the minutes say the following on this topic:

Many participants regarded the international situation as an important source of downside risks to domestic real activity and employment, particularly if declines in oil prices and the persistence of weak economic growth abroad had a substantial negative effect on global financial markets or if foreign policy responses were insufficient. Read More

Global Manufacturing Economic Update – December 12, 2014

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Here are the files for this month’s Global Manufacturing Economic Update:

It has become increasingly clear over the past few weeks that North America stands out as a bright spot in an ever-challenging global economic environment. Real GDP in the United States grew an annualized 4.2 percent in the second and third quarters, and U.S. manufacturers remain mostly optimistic about the next year. Indeed, the U.S. economy is expected to expand by around 3 percent, its fastest rate in a decade. Likewise, Canada and Mexico — our two largest trading partners — have made improvements in their respective economies since earlier this year. Canada has the distinction of having the highest purchasing managers’ index (PMI) of any of our top 10 trading partners, holding steady in November at 55.3. Read More

Global Manufacturing Economic Update – January 10, 2014

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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

Global Manufacturing Economic Update – October 11, 2013

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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

Global Manufacturing Economic Update – August 9, 2013

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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

Global Manufacturing Economic Update – February 8, 2013

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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.

Mexico Formally Invited to Join TPP Negotiations

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Today it was announced that Mexico has been invited to formally enter the Trans-Pacific Partnership (TPP) negotiations. This is welcome news for manufacturers.

Since 2009, the NAM has expressed support for the inclusion of Mexico, Canada, and Japan in the TPP negotiations.  It has long been our position that, with regard to the TPP, one of the most important objectives we seek is encouraging additional trading partners to sign onto the TPP in the future, gradually increasing the scope of the TPP.  The inclusion of Mexico in the negotiations is an important development, as we enjoy a strong trade relationship to Mexico.

While the NAFTA was a groundbreaking agreement that has resulted in positive gains for both of our economies, there are some updates that could be made, and the TPP negotiations are a timely vehicle for those discussions to take place, ensuring that we can build upon the success of the NAFTA.  Some issues we hope to resolve with Mexico vis-à-vis the TPP negotiations deal with non-tariff barriers, as well as customs and intellectual property issues.

The key question is how to make progress on these issues without stalling the broader negotiations among the other nine negotiating nations and we look forward to working with our Mexican counterparts to identify measures that could achieve our goals in a timely and effective manner.

We welcome the opportunity to continue strengthening our trade relationship with Mexico to ensure even greater benefits for U.S. manufacturing workers.

Jessica Lemos is director of international trade policy, National Association of Manufacturers.

Telecommunications Agreement with Mexico Will Help Manufacturers

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This morning the United States signed an agreement with Mexico that should significantly improve the competitiveness of U.S. telecommunications equipment in the important and growing Mexican market. In 2010, bilateral trade in these products totaled about $25 billion. 

In another demonstration of the value to U.S. manufacturers of the North American Free Trade Agreement (NAFTA), Mexico will no longer require that U.S. products be (redundantly) tested in Mexico to demonstrate they meet Mexican standards/technical requirements. Under the “Mutual Recognition Agreement (MRA) for Conformation Assessment of Telecommunications Equipment,” Mexico will allow recognized American testing facilities and laboratories to test products and  certify that they meet Mexican requirements, and vice versa. 

Not having to ship products to a Mexican facility and pay for testing should reduce costs for U.S. telecommunications equipment manufacturers.  It should be of particular value to smaller manufacturers for whom redundant testing can be a significant cost hurdle.  It should also speed product entry as U.S. equipment can be tested in one facility at the same time to both U.S. and Mexican standards.

The National Association of Manufacturers thanks the U.S. Trade Representative Ron Kirk for getting this agreement done, the first with a Latin American country.  The NAM has long supported Mutual Recognition Agreements as one way among many to reduce the expense and time associated with meeting foreign standards and technical regulations that may have only minor differences with U.S. requirements. We encourage USTR to continue to look for commercially meaningful MRAs with other trade partners to help enhance America’s competitive edge.  Well done!

Stephen Jacobs is senior director of international business policy, National Association of Manufacturers.