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Global Manufacturing Economic Update – April 11, 2014

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

In its latest World Economic Outlook, the International Monetary Fund (IMF) now predicts global GDP growth of 3.6 percent in 2014 and 3.9 percent in 2015. The forecast for this year was essentially unchanged from the outlook in October, and it suggests that the global economy continues to recover. Global growth in 2013 was 3.0 percent. The IMF projects U.S. growth of 2.8 percent this year and 3.0 percent next year, up from 1.9 percent last year. Europe is another area where the IMF sees progress this year—albeit quite modestly—with real GDP growth of 1.2 percent in 2014 and 1.5 percent in 2015, with the continent emerging from its deep two-year recession. Despite the slightly better data overall, the IMF worries about low inflation in advanced economies, structural challenges in emerging markets and geopolitical risks.

The IMF also notes that China’s economy continues to decelerate, with real GDP growth of 7.5 percent in 2014 and 7.3 percent in 2015. This is consistent with recent data, which show activity in the manufacturing sector slowing down. The HSBC China Manufacturing Purchasing Managers’ Index (PMI) has contracted for three straight months with falling levels of new orders and output. On the positive side, export sales appeared to pick up a bit in March. Next week, we will get new data for industrial production, fixed-asset investment and retail sales. Each has eased significantly in recent reports. Still, even with these slower rates, the outlook for China remains strong overall, and China has already begun to put stimulative measures in place to boost the economy further. As noted in the past report, the Bank of China has also supported a depreciation of the yuan in the past few months, but it asserts that its actions have been mainly to fend off speculators.

Weaknesses in China and Russia have also weighed heavily on manufacturing activity figures for emerging markets. The HSBC Emerging Markets Manufacturing PMI fell below 50 for the first time since July as demand and production stagnated. Nonetheless, outside of China and Russia, the picture for emerging markets was somewhat more positive. Several countries continued to experience modest growth rates, albeit with a slower pace than the month before in some cases. Two notable strengths among emerging markets hail from Eastern Europe. The Czech Republic and Poland continue to see strong growth in their manufacturing sectors despite some deceleration in March. For instance, the production index in the Czech Republic has now exceeded 60 for two straight months, a sign that output is experiencing healthy gains of late.

In all of Europe, manufacturers report slow-but-steady progress. The Markit Eurozone Manufacturing PMI has now expanded for nine consecutive months, an encouraging sign after the deep two-year recession. France, which had lagged behind many of its peers on the continent, had its manufacturing PMI figure exceed 50 for the first time since July 2011. However, overall economic growth remains modest. The unemployment rate continues to be elevated, even as it fell below 12 percent for the first time in 13 months. Weak income growth has caused many to worry about possible deflationary concerns. Annual inflation rates in the Eurozone have fallen from 1.7 percent in March 2013 to 0.5 percent in March 2014, and producer prices declined in February. Aware of these trends, the European Central Bank (ECB) held interest rates steady and said it was prepared to pursue quantitative easing, if necessary, to stimulate the economy further.

Meanwhile, the U.S. trade deficit widened in February due to a decrease in goods exports and an increase in service-sector imports. Manufactured goods exports in the first two months of 2014 were 0.6 percent lower than during the same time period last year, which was disappointing. Nonetheless, we continue to be optimistic that better economic growth rates abroad will lead to improvements on the export front. Fortunately, four of our top five markets for U.S.-manufactured goods notched year-to-date increases in the first two months relative to last year, including Mexico, China, Japan and Germany.

Efforts to move forward U.S.–European and Asian–Pacific negotiations continue, and the World Trade Organization (WTO) is heading to the next stage of implementing the recently completed Trade Facilitation Agreement. On the legislative side, Export-Import (Ex-Im) Bank reauthorization efforts continue, while manufacturers keep pressing for congressional action on key trade legislation, such as Trade Promotion Authority (TPA) and the Miscellaneous Tariff Bill (MTB).

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

eurozone inflation rates - apr2014

Global Manufacturing Economic Update – March 21, 2014

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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

Global Manufacturing Economic Update – December 7, 2012

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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.

Economic Consequences of Russia’s Invasion of Georgia

By | Trade | 3 Comments

Looking at U.S. trade data, we’re a little suprised to see that even with its energy resources, Russia’s economy is still second tier. In 2007, Russia ranked 30th among countries in the value of U.S. exports shipped there, $7.3 billion, right behind the Philippines, Chile and Thailand. Granted, U.S. exports to Russia jumped 57 percent from 2006 to 2007.

Here’s the breakdown of U.S. exports to Russia in 2007 from TradeStatsExpress:



Value ($)





24.1 %




18.1 %




12.9 %




10.2 %


All Others


34.6 %


 Grand Total


100 %








So what happens now after the invasion of Georgia?

From the BBC’s world news roundup:


The threat of economic sanctions against Russia over its policy in relation to Georgia is becoming increasingly real. Threats of postponing our country’s accession to the WTO were voiced in the US yesterday. Experts think that should Washington and the EU decide to impose economic sanctions on our country, it could be metals companies that will sustain the heaviest losses. Gas and oilmen are not afraid of sanctions because right now the West cannot do without their supplies.

And Reuters:

MOSCOW (Reuters) – Blocking Russia from joining the World Trade Organization because of the conflict in Georgia would defy common sense and break Western promises, a Russian official said on Thursday in response to U.S. warnings.

A senior U.S. official said on Tuesday Russian integration into international institutions such as the WTO was in question because of Moscow’s military operations in Georgia. President George W. Bush said on Wednesday the fighting was hurting Russia’s efforts to join global economic and security bodies.

“There are no formal reasons to stop these (accession) talks,” the senior Russian official, who is close to the WTO membership negotiations, told Reuters.

Charles Krauthammer writes that Russia’s goal is the Finlandinization of Georgia and reviews non-military steps that the United States and its allies can take, including the dissolution of the G-8 and Russia’s barring from the WTO.

UPDATE: (5:10 p.m.) Imports from Russia, 2007. Energy dependence, insecurity, in action:




Value ($)





56.7 %




7.7 %




7.6 %




5.6 %


All Others


22.5 %


 Grand Total


100 %