NAM Global Manufacturing Economic Update: Softer Global Growth Continues

Date: March 15, 2019
Source: Chad Moutray, Ph.D. CBE, Chief Economist, National Association of Manufacturers (NAM)
The Monthly Toplines 
  • The J.P. Morgan Global Manufacturing PMI registered 50.6 in February, the slowest growth rate since June 2016. The headline index has decelerated since reaching nearly a seven-year high in December 2017 (54.4), even with slight positive expansion overall.
  • Among the largest export destinations, there were seven economies that had declining manufacturing activity in February: China, Germany, Hong Kong, Japan (first contraction since August 2016), South Korea, Taiwan and the United Arab Emirates.
  • Encouragingly, U.S.-manufactured goods exports rose 5.6 percent in 2018 to just shy of $1.4 trillion, using new seasonally adjusted data from TradeStats Express. As such, last year’s export pace was not far from the all-time high recorded in 2014, which was just more than $1.4 trillion. That suggests manufacturing exports grew strongly last year, building on the 4.7 percent gain in 2017, despite some headwinds from lingering trade policy uncertainties and a stronger U.S. dollar.
  • After pulling back somewhat over the past couple months, the dollar has once again started to trend higher. Indeed, the U.S. dollar has risen 9.1 percent since January 25, 2018, pinching earnings and providing a fresh challenge for growing international demand.
  • The IHS Markit Eurozone Manufacturing PMI contracted for the first time since June 2013, led by falling output and with continued declines for new orders and exports. Germany, Spain and Italy all contracted in February. Meanwhile, real GDP increased 1.8 percent in 2018, but on a year-over-year basis, Eurozone growth continues to slow, down from 1.6 percent in the third quarter to 1.1 percent in the fourth quarter. On a more positive note, the unemployment rate fell to 7.8 percent in January, the lowest since October 2008.
  • Manufacturing activity in China and Japan also contracted in the latest data, with the former declining for the third straight month. The Chinese economy decelerated as well, declining from 6.5 percent year-over-year in the third quarter to 6.4 percent in the fourth quarter. This was the slowest pace of growth since the fourth quarter of 1990.
  • The IHS Markit Canada Manufacturing PMI expanded at the slowest pace since December 2016 in February, even as the data continued to report modest growth overall. Employment growth slipped to its weakest reading since January 2017, pulling the headline index lower. In addition, real GDP edged up 0.1 percent in the fourth quarter, with 1.8 percent growth for 2018 as a whole, down from 3.0 percent in 2017.
  • After contracting in January for the first time since June 2016, manufacturing sentiment in the emerging markets returned to positive growth in February. The emerging markets, which had been weighed down by softer global growth and a strong U.S. dollar, should benefit from a more dovish monetary policy from the Federal Reserve.
  • Passage of the United States Mexico Canada Agreement, the negotiation of a durable trade agreement with China and the restoration of a fully functioning U.S. Export-Import Bank are top issues of focus for manufacturers, the president and Congress.
    • Following the delay in ratcheting up tariffs on imports from China, discussions are continuing between U.S. and Chinese negotiations with a possible meeting between President Donald Trump and Chinese President Xi Jinping in the coming weeks.
    • Congressional consideration of the USMCA remains a top issue with manufacturers canvassing Capitol Hill to build support.
    • With action by the Senate Banking Committee to move forward Ex-Im Board nominees, manufacturers are urging full Senate action and work to move forward a robust reauthorization as early as possible in 2019.
    • The Commerce Department sent its Section 232 report on the national security implications of automotive imports to the president and initiated a new investigation into titanium sponge.
    • The United States Trade Representative released its annual trade agenda report and also indicated that duty-free preferences for imports from India and Turkey will be terminated by early May.
MEMA Industry News Editor’s Note: As an added member benefit, MEMA includes the monthly NAM Global Manufacturing Economic Update in MEMA Industry News. The full report is available here.
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