NAM: Global Manufacturing Economic Update
For its part, the J.P. Morgan Global Manufacturing PMI expanded at its fastest pace since May 2011. Both demand and production saw two-year highs, with hiring expanding at rates not seen since August 2011. Moreover, the index for future output also moved higher, at nearly a two-year high, and would seem to indicate strong growth in the coming months. In addition, 11 of the top-15 markets for U.S.-manufactured goods exports experienced growth in their manufacturing sectors in February, unchanged from January but up from just seven in August.
The strongest manufacturing growth among our top trading partners occurred in the Netherlands, Germany, the United Arab Emirates, Canada, the United Kingdom and Taiwan. Germany and the Netherlands experienced multiyear highs in February, notching the best index readings in 69 and 70 months, respectively. In contrast to those markets, Brazil, Hong Kong and South Korea continued to contract. Each has been mired in negative territory for much of the past two years. Of course, South Korea has been in the news of late due to the impeachment of President Park Geun-hye on corruption charges. As a whole, however, emerging markets have strengthened of late, mirroring the larger global trend. In fact, manufacturing activity in the emerging markets rose at its fastest pace since July 2014, expanding for the eighth consecutive month.
Indeed, when looking at the market-by-market analysis, you see a lot of multiyear highs in the headline PMI numbers, which is quite encouraging. The Markit Canada Manufacturing PMI increased at its quickest clip since November 2014, boosted by improvements in Alberta, British Columbia and Ontario. Real GDP in Canada grew 2.6 percent in the fourth quarter, led by strength in consumer spending but slowed down by drags from business investment and net exports.
Likewise, Europe has continued to perform admirably despite political uncertainties on the continent. Mirroring the global numbers, manufacturers in the Eurozone reported their best growth rates since April 2011. Eurozone real GDP grew 1.7 percent year-over-year, and the unemployment rate remained at its lowest level since May 2009. Perhaps more importantly, pricing pressures have started to pick up, with the annual inflation rate rising to 2.0 percent in February, its highest level since January 2013. As such, the European Central Bank is likely to start easing up on monetary stimulus later this year.
It is still early into 2017, but the manufactured goods exports picture is already better this year than the past two years. Using non-seasonally adjusted data, U.S.-manufactured goods exports totaled $83.09 billion in January, up 4.87 percent from $79.23 billion in January 2016. With that said, the U.S. trade deficit rose from $44.26 billion in December to $48.49 billion in January, its highest level since March 2012.
Key trade appointees for the Trump administration move forward, as the administration releases its first annual trade policy report. The World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA) entered into force. Expectations remain high that the administration will soon notify a renegotiation of the North American Free Trade Agreement (NAFTA), as it considers other potential negotiations as well. The NAM continues to push for movement on nominations to the Export-Import (Ex-Im) Bank Board of Directors and is focused on other key issues involving conflict minerals, the Miscellaneous Tariff Bill (MTB) and intellectual property (IP).