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NAM: Global Manufacturing Economic Update

Associated Industries of Missouri is the sole official designated partner of the National Association of Manufacturers in Missouri.

In the post-Brexit world, much has been made of the uncertainties related to the vote, both for the United Kingdom itself and for the broader global economy. Indeed, global headwinds continue to represent the largest downside risks to U.S. growth. In the aftermath of the British vote, manufacturing in the United Kingdom contracted in July at its fastest pace since February 2013, which is perhaps not surprising given the uncertainties created by the June 23 vote. For its part, the International Monetary Fund (IMF)downgraded worldwide growth in 2016 from 3.2 percent in its April outlook to 3.1 percent in its most recent projection in July. It estimates the United Kingdom will grow 1.7 percent and 1.3 percent in 2016 and 2017, respectively, with the latter figure off 0.9 percent from the April release. At the same time, the IMF added the following disclaimer to its release: “With ‘Brexit’ still very much unfolding, the extent of uncertainty complicates the already difficult task of macroeconomic forecasting.” Indeed, there are already reportsshowing the U.K. economy declined in July. Despite lingering global challenges, including Brexit, one could also make the case that the global economy has improved in recent months. The J.P. Morgan Global Manufacturing PMI grew at its fastest pace in July since November on decent growth in orders and output. This was the second straight monthly expansion for the global index after recording essentially stagnant growth in both April and May. In other good news, manufacturing activity in China expanded for the first time since February 2015 (up from 48.6 to 50.6), even as it remains clear that economic growth continues to decelerate for the country. In addition, manufacturers in the emerging markets reported expanding activity in July for only the second time in 16 months, mirroring the progress in China. Overall, nine of the top 15 markets for U.S.-manufactured goods had expanding manufacturing activity for the month, the same pace as the previous month but up from just five in April. As such, we have seen some progress with key international markets since the spring. However, there are lingering problems in Brazil (up from 43.2 to 46.0), France (up from 48.3 to 48.6), Hong Kong (up from 45.4 to 47.2) and Japan(up from 48.1 to 49.3) that have not abated yet despite some easing in the rates of decline for each in July. Of those top 15 markets, countries with the fastest growth in manufacturing activity in July included Germany (down from 54.5 to 53.8), the Netherlands (up from 52.0 to 53.2), Canada (up from 51.8 to 51.9), Australia (up from 51.0 to 51.8) and Taiwan (up from 50.5 to 51.0). The bottom line, however, is that U.S.-manufactured goods exports continue to struggle. Across the past year and a half, international headwinds have made it extremely difficult to increase export sales abroad. Using newly updated figures from TradeStats Express, U.S.-manufactured goods exports totaled $626.3 billion through the first half of 2016, down 5.9 percent from the $665.4 billion in the same time frame in 2015 using seasonally adjusted data. This decline extended the 6.2 percent decrease in U.S.-manufactured goods exports for last year as a whole. Moreover, year-to-date exports were lower to the top six markets for U.S.-manufactured goods. Trade policy continued to be a prominent campaign issue, with statements in both convention platforms falling short of the key elements that the NAM is seeking, from creating a pathway for consideration of the Trans-Pacific Partnership (TPP) this year to other measures that will open markets, improve the competitiveness of manufacturers in the United States and advance a rules-based system. Efforts continue as well to ensure a fully functioning Export-Import (Ex-Im) Bank, to promote increased ratifications of the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA), to move forward the Transatlantic Trade and Investment Partnership (TTIP) and to prepare for a new Miscellaneous Tariff Bill (MTB) process that will be launched this fall.

Chad Moutray, Ph.D., CBE

Chief Economist

National Association of Manufacturers

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