NAM: Global Manufacturing Economic Update
The International Monetary Fund expects global growth to slow from 3.6 percent in 2018 to 3.3 percent in 2019, according to its latest World Economic Outlook. That estimate is down 0.2 percent from its January outlook. The IMF forecasts real GDP growth of 2.3 percent in the United States in 2019, down from 2.9 percent in 2018, and it predicts that advanced economies will ease from 2.2 percent in 2018 to 1.8 percent in 2019.
This was consistent with softening growth in other indicators as well. For instance, the J.P. Morgan Global Manufacturing PMI was unchanged in March at 50.6, remaining the slowest growth rate since June 2016. The headline index has decelerated since reaching nearly a seven-year high in December 2017 (54.4), even with a slight positive expansion overall.
Seven of the top 20 markets for U.S.-manufactured goods exports contracted in March, the same pace as in February. In March, China and Singapore expanded for the first time since late last year, but France and Mexico both returned to negative territory. Other markets that continued to contract included Germany, Hong Kong, Italy, Japan, South Korea and Taiwan.
Interestingly, the United Kingdom had the strongest PMI reading among these markets, but this might be somewhat deceiving. The solid reading in March in the United Kingdom had more to do with stockpiling of inventories as manufacturers tried to get ahead of Brexit uncertainties.
The Caixin China General Manufacturing PMI expanded for the first time since November, suggesting that business leaders felt somewhat more upbeat in March. Real GDP held steady at 6.4 percent growth year-over-year in the first quarter of 2019, and following notable decelerations starting at the tail end of last year, Chinese industrial production, fixed asset investmentand retail sales all ramped up in March.
The IHS Markit Eurozone Manufacturing PMI contracted for the second straight month, dropping to the lowest level since April 2013, and industrial production fell for the fourth time in the past six months. More encouragingly, retail sales grew for the second straight month in February, and the unemployment rate remained at 7.8 percent in February, the lowest since October 2008.
The U.S. trade deficit pulled back further from the 10-year high of $59.90 billion in December to $51.13 billion in January and $49.38 billion in February, the lowest point since June 2018. More importantly, U.S.-manufactured goods exports rose 1.65 percent in the first two months of 2019 relative to the same time frame in 2018, extending the solid growth last year overall.
Manufacturers continue to focus on key trade developments at home and overseas, including:
Efforts to finalize a durable and enforceable trade deal between the United States and China and address tariffs that are undermining U.S. manufacturing activity;
Continued work by the administration and manufacturers to promote passage of the United States–Mexico–Canada Agreement;
Prospects for Senate action on the four nominees to the U.S. Export-Import Bank Board of Directors needed to restore a quorum following the recent Senate rules change, and for House movement on robust and long-term Ex-Im reauthorization legislation;
Action to move forward a strong reform and modernization agenda for the World Trade Organization;
Updates on border personnel movements and impacts on manufacturers;
Foreign trade barriers identified as part of the U.S. Trade Representative’s annual report released at the end of March; and
Updates on the United Kingdom’s efforts to negotiate an exit from the European Union.