NAM: Global Manufacturing Economic Update
The World Bank forecasts a decline of 5.2% in real global GDP in 2020, following 2.4% growth in 2019. It would be the worst decrease in worldwide growth since the aftermath of World War II, with global economies sharply pulling back on activity during the COVID-19 pandemic. With that said, the global economy should rebound in 2021, with worldwide growth jumping 4.2%.
After dropping to its lowest point since March 2009, the J.P. Morgan Global Manufacturing PMI rebounded somewhat. It rose from 39.6 in April to 42.4 in May, with activity still declining sharply despite some progress. Manufacturers are cautiously upbeat about better production data over the next six months as firms ramp up activity, albeit with very modest growth expected.
Chinese manufacturing activity expanded at the fastest pace since January, a sign that its economy continues to stabilize. In April, industrial production grew 3.9% year-over-year, the first positive reading so far this year and a definite improvement from the 13.5% and 1.1% declines seen in January/February and March, respectively. At the same time, fixed-asset investment and retail sales declined at slower rates in April, but continued to be negative.
China was the only one of the top 10 markets for U.S.-manufactured goods to expand in May, returning to positive territory after pulling lower in April. In the previous month, most of the top 10 markets had contracted at paces that were either the worst since the Great Recession or at record lows. In May, seven of these economies saw improvements, albeit at rates of decline that remained quite severe.
With economies around the world slowing materially due to COVID-19, there were very sharp reductions in trade in April.
The U.S. trade deficit rose from $42.34 billion in March to $49.41 billion in April, an eight-month high. Goods exports dropped from $127.72 billion to $95.52 billion, the lowest point since September 2009. That change more than offset the decrease in goods imports, which declined from $193.74 billion to $167.35 billion, the weakest pace since October 2010.
The underlying data reflect weaknesses in the economy and shifting trade patterns for airplanes, automobiles and parts, jewelry, machinery, metals and petroleum, pharmaceuticals and semiconductors and electronics, among other trends.
In non-seasonally adjusted data, U.S.-manufactured goods exports totaled $334.71 billion through the first four months of 2020, dropping 10.25% from $372.92 billion for the same time frame in 2019.
Service-sector trade volumes also declined dramatically, both for exports and imports, with the service-sector trade surplus decreasing from $23.69 billion to $22.43 billion.
On the positive side, the petroleum trade surplus was the highest on record, at $3.22 billion.
The U.S. dollar has fallen 2.5% against a broad-based index of currencies for goods and services since April 24, according to the Federal Reserve. The recent pullback reverses the trend seen earlier in the spring, when investors flocked to the U.S. dollar and dollar-denominated assets due to the COVID-19 pandemic. The current trend coincides with signs of improvements in economic activity.
Manufacturers continue to advance efforts with the administration and Congress to ensure trade certainty and address challenges overseas, particularly amid the COVID-19 pandemic:
Monitoring U.S.–China trade dynamics amid China’s actions on Hong Kong and the addition of the Chinese government and commercial bodies to Commerce’s Entity List
Tracking United States–Mexico–Canada Agreement implementation preparations with entry into force expected on July 1
Stressing the importance of U.S. leadership at the World Health Organization, following the U.S. announcement of plans to terminate its relationship with the WHO
Securing a strong Miscellaneous Tariff Bill in 2020 to eliminate tariffs on products not produced or available in the United States