NAM: Global Manufacturing Economic Update
The J.P. Morgan Global Manufacturing PMI contracted for the fourth straight month, albeit up from 49.3 in July, the lowest reading since October 2012, to 49.5 in August. There continued to be some optimism that future output would rebound over the coming months.
Eleven of the top 20 markets for U.S.-manufactured goods experienced a contraction in manufacturing activity in their economies in August. This contraction affected six of the top seven export markets, with only China seeing a very slight expansion from that list, surprisingly rebounding from a contraction in the June and July data.
Speaking of China, real GDP grew 6.2 percent year-over-year in the second quarter. That was the slowest pace of growth in China since the first quarter of 1992, illustrating how much its economy has decelerated. Moreover, industrial production grew at 4.8 percent year-over-year in July, the weakest since February 2002.
The IHS Markit Eurozone Manufacturing PMI contracted for the seventh straight month. The United Kingdom continued to be challenged for a Brexit solution, with its weakest reading since July 2012. Other major economies were also in contraction, including Germany. However, modest expansions were seen in France, Greece and the Netherlands. Eurozone real GDP grew 1.2 percent year-over-year in the second quarter, or nearly half of the rate in the second quarter of 2018 (2.3 percent).
There continued to be declining growth in the manufacturing sectors of our two largest trading partners, Canada and Mexico. While each reflected ongoing weaknesses, Canadian real GDP jumped 3.7 percent at the annual rate in the second quarter, spurred higher by strong exports. This appeared to be a timing issue, however, as the forecast for 2019 is for 1.5 percent growth.
U.S.-manufactured goods exports totaled $656.85 billion through the first seven months of 2019, down 2.52 percent from $673.85 billion for the same period in 2018. This suggests that international demand for U.S.-manufactured goods has weakened in the first half of this year after experiencing better data in both 2017 and 2018.
The U.S. dollar has appreciated 9.1 percent against major currencies since January 25, 2018, according to the Federal Reserve, and manufacturers continued to cite foreign exchange risks in their earnings reports.
With Congress back in session, manufacturers are expanding efforts to secure key wins on international policy issues, while also working with the administration and other policymakers on ongoing international talks. Their efforts include the following:
Pushing for passage of the U.S.–Mexico–Canada Agreement and a long-term and robust reauthorization of the U.S. Export-Import Bank as quickly as possible in the fall
Seeking concrete movement on U.S.-China bilateral trade agreement negotiations to correct market distortions, while also addressing challenging tariffs and retaliation
Promoting the private sector’s crucial role in tackling global issues with United Nations’ agencies
Advancing a new Miscellaneous Tariff Bill process to eliminate unnecessary border tariffs on manufacturers