In the first half of 2019, U.S.-manufactured goods exports have fallen 2.0 percent relative to the pace seen in the same time frame in 2018. International demand for U.S.-manufactured goods has weakened so far this year after experiencing better data in both 2017 and 2018.
The J.P. Morgan Global Manufacturing PMI contracted for the third straight month, down to the lowest reading since October 2012. PMI data continue to reflect softening in manufacturing activity worldwide, even with some stabilization in Canada, our largest trading partner. Twelve of the top 20 markets for U.S.-manufactured goods exports experienced contractions in manufacturing activity in July, up from 11 in June, nine in May and six in April.
The IHS Markit Eurozone Manufacturing PMI contracted for the sixth straight month, dropping to the lowest point since December 2012. Germany, the largest market in Europe, has contracted in every month so far in 2019, and the United Kingdom, which continues to have lingering uncertainties related to Brexit, was unchanged in July, continuing to shrink at the fastest rate since February 2013. Eurozone real GDP slowed to just 1.1 percent year-over-year in the second quarter, but encouragingly, the unemployment rate was the best since July 2008.
Prior to the current trade skirmish, there were signs that the Caixin China General Manufacturing PMI had stabilized somewhat in July despite continuing to contract marginally (49.9). Nonetheless, real GDP grew 6.2 percent year-over-year in the second quarter, down from 6.4 percent in the first quarter and the slowest pace since the first quarter of 1992, illustrating how much its economy has decelerated. Of course, the latest headlines could impact those figures negatively, with the Chinese yuan falling to the lowest point against the U.S. dollar since April 2008.
Overall, the U.S. dollar has appreciated 9.1 percent against major currencies since Jan. 25, 2018, according to the Federal Reserve, and manufacturers continue to cite foreign exchange risks in their earnings reports.
Worries about a global economic slowdown—which has been exacerbated by renewed trade uncertainties—has caused financial markets to fall dramatically. For instance, the Dow Jones Industrial Average has fallen roughly 5 percent since July 15, and yields on 10-year Treasury notes have plummeted to the lowest rates since October 2016.
Manufacturers are working through August to push strong trade outcomes with Congress and meet challenges overseas, including:
Building support among key members of Congress to move the U.S.–Mexico–Canada Agreement and a 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;
Pressing for stronger action to tackle the rising tide of counterfeit products;
Seeking movement on multilateral talks to reform and modernize the World Trade Organization; and
Monitoring and providing input on new sanctions activity.