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  • AIM Team

NAM: Global Manufacturing Economic Update

The J.P. Morgan Global Manufacturing PMI expanded for the second straight month, albeit only marginally, at 50.1 in December. More importantly, it sustained progress in the sector following six consecutive months of contraction.

Half of the top 12 markets for U.S.-manufactured goods contracted in December, down from seven in November. However, nine of these markets had lower PMI readings in December than in November. As a result, while global manufacturing activity has stabilized somewhat in the past few months, the sector remains weaker than desired.

The Caixin China General Manufacturing PMI expanded for the fifth consecutive month, but with a slower pace of growth for new orders, output and exports. Several key measures have shown progress, albeit at decelerated paces. In November, industrial production and retail sales both rebounded, even as real GDP grew 6.0% year-over-year in the third quarter, the slowest pace since the first quarter of 1992.Likewise, the IHS Markit Canada Manufacturing PMI expanded in December for the fourth straight month, albeit at a slower pace due to declining new orders and reduced growth for output and employment. Yet, Canadian manufacturers continued to feel upbeat in their outlook.The IHS Markit Emerging Markets Manufacturing PMI expanded for the sixth straight month, remaining at 51.0 in December. While the data provided mixed results, many key emerging markets had slightly slower expansions in December. Hong Kong continued to struggle due to ongoing anti-China protests, but rebounded from the lowest reading since April 2003 in November.

Meanwhile, the IHS Markit Eurozone Manufacturing PMI ended the year on another weak note, down from 46.9 in November to 46.3 in December. It contracted for the 11th consecutive month, highlighting ongoing challenges on the continent. Germany contracted in every month in 2019, with employment falling in December to just shy of the pace in October, which was the worst reading since January 2010. Other Eurozone markets also experienced the weakest activity since 2012 or 2013, with Greece being a surprise bright spot (along with France).

The U.S. trade deficit decreased to $43.09 billion in November, the lowest level since October 2016. Goods imports fell to a 15-month low, with real imports of petroleum in 2012 dollars at a record low since the series began in 1994 ($27.23 billion). At the same time, U.S.-manufactured goods exports fell 3.0% through the first 11 months of 2019 relative to the same time frame in 2018, highlighting weaknesses in the sector year to date.The U.S. dollar has depreciated 2.6% against major currencies for goods since Sept. 30, according to the Federal Reserve. Yet, manufacturers have continued to cite foreign exchange risks in their earnings reports.Manufacturers ended 2019 with strong momentum from congressional action on two top trade priorities:

Congressional passage and enactment of a long-term and robust reauthorization of the U.S. Export-Import Bank

Bipartisan passage of legislation approving and implementing the U.S.–Mexico–Canada Agreement by the House of Representatives, which is expected to move quickly through the SenateManufacturers remain focused on several other important trade priorities:

Securing a strong outcome on “phase one” of a U.S.–China bilateral trade agreement expected to be signed next week and continued work to broaden the agreement to address other market distortions and remove challenging tariffs and retaliation

Moving forward a positive agenda at the World Trade Organization

Securing a strong Miscellaneous Tariff Bill in 2020 to eliminate tariffs on products not produced or available in the United States


Reviewing congressional activity relating to sanctions and new rules on information and communications supply chains

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