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  • Writer's pictureAIM Team

NAM: Global Manufacturing Economic Update

  1. Similar to the World Bank, the International Monetary Fund (IMF) cut its global economic forecast slightly. The IMF now expects worldwide growth to expand by 3.5 percent in 2019, down from its estimate of 3.7 percent growth in October. For what it is worth, the IMF predicts 2.9 percent and 2.5 percent in 2018 and 2019, respectively, in the United States (which, coincidently, were also the World Bank’s and my forecasts for those years.) The IMF cites trade uncertainties, increased volatility in financial markets, higher debt levels and other challenges as downside risks to growth.

  2. The J.P. Morgan Global Manufacturing PMI™ registered 50.7 in January, down from 51.4 in December and signaling the slowest growth rate since August 2016. The headline index has decelerated since reaching a seven-year high in December 2017 (54.5), even with slight positive expansion overall. Reports also suggested that manufacturing activity in Canada, the Eurozone and Japan also grew at their weakest paces since mid-2016, and China weakened further in January after contracting in December for the first time since May 2017.

  3. Among the largest export destinations, there were six economies that had declining manufacturing activity in January. While that is an improvement from having seven nations in contraction in December, it continues to represent some softening overall. Indeed, all those markets were expanding as recently as June 2018. In January, France and Mexico returned to positive growth, but Germany slipped into contraction territory for the first time since November 2014.

  4. The IHS Markit Emerging Markets Manufacturing PMI® contracted in January for the first time since June 2016. Overall activity in the emerging markets weakened across the year, weighed down by softer global growth and a strong U.S. dollar. With that said, manufacturers continue to see healthy production growth over the next six months, with the index for future output up from 59.2 to 60.9, its best reading since May 2018.

  5. The dollar has trended lower in recent weeks, down 2.1 percent since its recent peak on December 11, 2018. Yet, manufacturers are likely to complain about a stronger U.S. dollar, as it has risen 6.9 percent since Jan. 25, 2018, against major currencies, according to the Federal Reserve.

  6. U.S.-manufactured goods exports rose 5.9 percent through the first 11 months of 2018 relative to the pace at the same timeframe in 2017. That suggests that manufacturing exports have continued to build on the rebound in international demand that started last year. At the same time, the U.S. trade deficit eased from its highest rate in 10 years, down from $55.70 billion in October to $49.31 billion in November.

  7. U.S.-China trade talks, congressional action on the new U.S.-Mexico Canada Agreement (USMCA) and restoring the U.S. Export-Import (Ex-Im) Bank are top issues of focus for manufacturers, the president and Congress.

  8. U.S. and Chinese negotiators are meeting again this week seeking to reach a deal by March 1 that would prevent a ratcheting up in tariffs. Discussions are underway for a potential meeting between President Donald Trump and Chinese President Xi Jinping in the coming weeks.

  9. Activity has ramped up by manufacturers, the Trump administration and the Hill on next steps for congressional consideration of the USMCA with manufacturers canvassing the hill to build support.

  10. Manufacturers remain focused on restoring the Ex-Im Bank to full functionality and ensure a robust reauthorization in 2019.

  11. The Commerce Department may soon release its Section 232 report on the national security implications of automotive imports.



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