NAM: Global Manufacturing Economic Update
The global economy remains weak, but there are signs that manufacturing activity has stabilized. Indeed, the sector continues to grapple with slowing growth and trade uncertainties, but there are also “green shoots” that provide some cautious optimism for the coming months.
The J.P. Morgan Global Manufacturing PMI expanded for the first time since April, continuing to improve after reaching the lowest level since October 2012 in July. Yet, exports continued to decline, albeit at the same pace as last month.
Seven of the top 12 markets for U.S.-manufactured goods experienced contracting activity in their manufacturing sectors in November, up from six in October. The weakest PMI readings continued to be in Germany (44.1) and Hong Kong (38.5). Germany has contracted in every month so far this year, but the headline index for manufacturing activity was at the highest point since June. As one might imagine, Hong Kong’s lowest reading since April 2003 was largely related to political unrest but also due to slowing global activity.
Nonetheless, there were signs of possible stabilization. Of those top 12 markets for U.S.-manufactured goods, eight had a better PMI in November than in October.
The Caixin China General Manufacturing PMI improved for the fifth consecutive month, the strongest reading since December 2016. With that said, economic activity in China continues to reflect decelerating growth. Real GDP grew 6.0% year-over-year in the third quarter, down from 6.2% in the second quarter and the slowest pace since the first quarter of 1992.
The IHS Markit Canada Manufacturing PMI expanded in November at the fastest pace since February, growing for the third straight month. While survey respondents felt more upbeat, many key economic indicators reflect some ongoing softness, with real GDP up just 1.3% at the annual rate in the third quarter, and manufacturing employment down by 27,500 in November.
After falling to the lowest point in nearly seven years in September, the IHS Markit Eurozone Manufacturing PMI improved for the second straight month, up from 45.7 in September, to 45.9 in October, to 46.9 in November. Nonetheless, it contracted for the 10th consecutive month. Real GDP slowed to 1.2% year-over-year in the third quarter, consistent with the pace in the second quarter, and industrial production fell 2.2% over the past 12 months in October. On the positive side, the unemployment rate has remained at 7.5%, which is the lowest rate since July 2008.
The IHS Markit Emerging Markets Manufacturing PMI expanded for the fifth straight month, remaining at 51.0 in November.
The U.S. trade deficit decreased to $47.20 billion in October, the lowest level since June 2018, with goods exports and imports both falling to a two-year low. Encouragingly, real exports of petroleum in 2012 dollars were the highest since the series began in 1994, helping to push the real petroleum trade deficit to a record low in October.
In non-seasonally adjusted data, U.S.-manufactured goods exports have fallen 3.0% year to date through the first 10 months of 2019 relative to the same period in 2018.
With less than two weeks left in the current session of Congress, manufacturers are working toward quick action on two key legislative trade priorities:
Passage of the U.S.–Mexico–Canada Agreement
Passage of a long-term and robust reauthorization of the U.S. Export-Import Bank
Manufacturers are also focused on several other important trade developments:
Promoting a revitalization of the World Trade Organization and pressing for a long-term extension of the e-commerce moratorium
Promoting concrete movement on U.S.–China bilateral trade agreement negotiations to correct market distortions, while also addressing challenging tariffs and retaliation
Reviewing congressional activity relating to sanctions and new rules on information and communications supply chains