Fluid Power Journal

Economic Report

Global Manufacturing Update

By Chad Moutray, Chief Economist, National Association of Manufacturers

May 9, 2014 – The global economy continues to expand, boosted by strengths in North America and Europe. Yet, there are also notable weaknesses, particularly in Asia and South America, where growth is decelerating. As a result, four of the top 10 markets for U.S.-manufactured goods experienced declining manufacturing activity levels in April, up from two in March. The four countries with manufacturing contractions were Brazil, China, Hong Kong, and Japan. Fortunately, our two largest trading partners—Canada and Mexico—expanded modestly in April, albeit at a slower pace than a few months ago. At the same time, the fastest pace of growth among our top trading partners was in Europe, including the United Kingdom and Germany.

Reflecting some of the softness abroad, the JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) declined for the second straight month in April (down from 52.4 to 51.9), its lowest point since October. Even with the easing, growth in manufacturing demand and output remained positive, increasing modestly. Roughly one-quarter of the global PMI data stems from activity in the United States, which continues to see a rebound from winter-related slowdowns earlier in the year. In fact, Markit reported that production growth (up from 57.5 to 58.2) was at its highest level since March 2011. Nonetheless, even with recent progress, the U.S. market continues to have its challenges, with stagnant real GDP growth in the first quarter, mixed news about the labor market, and lingering uncertainties about the economy and governmental policies.

econ graph

Most notably, one of the larger U.S. concerns so far this year has been export growth. Manufactured goods exports in the first quarter rose just 1.1% relative to the first three months of 2013, continuing a trend of decelerated growth in international sales over the past two years. On the positive side, manufactured goods exports achieved an all-time high last year, with $1.38 trillion in goods sold overseas. We remain hopeful that the export market will pick up in the coming months. Moreover, most of our top markets saw modest gains year-to-date relative to the same time frame last year. The exception is Canada, our largest trading partner, with exports down 0.4% year-to-date.

Trade negotiations and legislation, as well as NAM trade events, are top of mind this month, aptly designated as World Trade Month (an annual designation by the President). Debate on Capitol Hill is heating up on the reauthorization of the Export-Import (Ex-Im) Bank, a top priority of manufacturers, and efforts also continue to move forward the Miscellaneous Tariff Bill (MTB), which expired more than 17 months ago. Bilateral and plurilateral discussions on the Trans-Pacific Partnership (TPP) talks as well as U.S.-EU trade negotiations are also ongoing.

On key policy issues, manufacturers won a partial victory on conflict minerals, but are awaiting action on their request to stay the May reporting deadline. The Obama Administration released its annual report on intellectual property (IP) rights overseas, echoing manufacturers’ concerns in several countries, including China, Russa, Brazil, India, Canada, and others. In April, Sens. Chris Coons (D-DE) and Orrin Hatch (R-UT) introduced new trade leglislation, on which manufacturers are seeking action.

* Reprinted with permission.  

The National Association of Manufacturers (NAM) represents small and large manufacturers in every industrial sector and in all 50 states. For more information, visit www.nam.org.

Fluid Power Journal is the official publication of the International Fluid Power Society
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