A Manufacturing Blog Reporting on Manufacturing Policy and Politics
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A Manufacturing Blog Reporting on Manufacturing Policy and Politics Here is the summary for this month's Global Manufacturing Economic Update: Manufacturers are facing some significant headwinds from sluggish growth abroad and from a U.S. dollar that has strengthened sharply over the past few months. According to the Federal Reserve Board , the trade-weighted U.S. dollar index against major currencies has risen from 75.6968 on July 1 to 91.5660 on March 6, a 21.0 percent increase. Along those lines, the euro has fallen to its lowest levels since January 2003. It peaked in 2014 on May 6 at $1.3924 for each euro. On March 12, it closed at $1.0640 to the euro, with some expectations that it will move to parity soon. It last reached parity in November 2002. Overall, these developments could hurt the ability of manufacturers in the United States to grow exports. (Some recent comments from me in the media on this topic can be found in the Financial Times , The New York Times and The Washington Post .) Reduced crude oil prices have posed another challenge. Beyond the negative impacts seen throughout the energy sector and its supply chain in the United States, lower petroleum prices have also hampered growth in Canada, our largest trading partner. The Royal Bank of Canada (RBC) Canadian Manufacturing PMI dropped from 51.0 to 48.7, its first contraction since March 2013. Canada was one of two countries among our top 10 markets for U.S.-manufactured goods--the other being Brazil --that had negative sentiment in February. Each slipped below the threshold level of 50 in their PMI values for the month, with China and Hong Kong shifting into the growth column this time. In contrast to these nations, Mexico and the United Kingdom had the fastest paces of expansion in their manufacturing sectors among our top 10 trading markets last month. Despite some challenges, the global economy continues to expand modestly. The J.P. Morgan Global Manufacturing PMI edged marginally higher, up from 51.7 in January to 52.0 in February. This marks the fastest pace in four months. This measure not only reflects improvements in the U.S. economy , but also some incremental progress in China , Europe and the emerging markets . Each had slightly better data on new orders and output. Yet, weaknesses persist. Eurozone real GDP grew 0.3 percent in the fourth quarter, or 1.3 percent on a year-over-year basis. In addition, industrial production in the Eurozone declined 0.1 percent in January. Many observers continue to worry about deflation, with the latest annual inflation data showing a decline of 0.3 percent in February exacerbating those concerns. Moreover, the unemployment rate remains elevated at 11.2 percent. It is for that reason that the European Central Bank will spend 1 trillion euros over the next 18 months to help stimulate the European economy as part of its quantitative easing program. Meanwhile, manufacturing activity in China bounced back from two straight months of decline, but its economy continues to decelerate. After growing 7.3 percent year-over-year in the fourth quarter, China has reduced its target real GDP growth rate for 2015 to 7 percent. Along those lines, a number of recent indicators have reflected slower paces of growth. This included industrial production , fixed asset investments and retail sales . Investments from manufacturers have fallen from 13.5 percent year-over-year in December to 10.6 percent in January/February. It is worth noting that each of these growth rates is strong relative to other nations, but the challenge is that growth remains much less than what we have become accustomed to for China. Action on trade legislation, particularly Trade Promotion Authority (TPA), is now expected in the April-May timeframe, as efforts to negotiate a bipartisan, bicameral TPA bill continue. New legislation reauthorizing the Export-Import (Ex-Im) Bank has been introduced in the House, while
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Here is the summary for this month's Global Manufacturing Economic Update:?Manufacturers are
Transcript of A Manufacturing Blog Reporting on Manufacturing Policy and Politics
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A Manufacturing Blog Reporting on Manufacturing Policyand Politics
Here is the summary for this month's Global Manufacturing Economic Update:
Manufacturers are facing some significant headwinds from sluggish growth abroad and from a U.S.dollar that has strengthened sharply over the past few months. According to the Federal ReserveBoard, the trade-weighted U.S. dollar index against major currencies has risen from 75.6968 on July1 to 91.5660 on March 6, a 21.0 percent increase. Along those lines, the euro has fallen to its lowestlevels since January 2003. It peaked in 2014 on May 6 at $1.3924 for each euro. On March 12, itclosed at $1.0640 to the euro, with some expectations that it will move to parity soon. It last reachedparity in November 2002. Overall, these developments could hurt the ability of manufacturers in theUnited States to grow exports. (Some recent comments from me in the media on this topic can befound in the Financial Times, The New York Times and The Washington Post.)
Reduced crude oil prices have posed another challenge. Beyond the negative impacts seenthroughout the energy sector and its supply chain in the United States, lower petroleum prices havealso hampered growth in Canada, our largest trading partner. The Royal Bank of Canada (RBC)Canadian Manufacturing PMI dropped from 51.0 to 48.7, its first contraction since March 2013.Canada was one of two countries among our top 10 markets for U.S.-manufactured goods--the otherbeing Brazil--that had negative sentiment in February. Each slipped below the threshold level of 50in their PMI values for the month, with China and Hong Kong shifting into the growth column thistime. In contrast to these nations, Mexico and the United Kingdom had the fastest paces ofexpansion in their manufacturing sectors among our top 10 trading markets last month.
Despite some challenges, the global economy continues to expand modestly. The J.P. Morgan GlobalManufacturing PMI edged marginally higher, up from 51.7 in January to 52.0 in February. Thismarks the fastest pace in four months. This measure not only reflects improvements in the U.S.economy, but also some incremental progress in China, Europe and the emerging markets. Each hadslightly better data on new orders and output. Yet, weaknesses persist. Eurozone real GDP grew 0.3percent in the fourth quarter, or 1.3 percent on a year-over-year basis. In addition, industrialproduction in the Eurozone declined 0.1 percent in January. Many observers continue to worry aboutdeflation, with the latest annual inflation data showing a decline of 0.3 percent in Februaryexacerbating those concerns. Moreover, the unemployment rate remains elevated at 11.2 percent. Itis for that reason that the European Central Bank will spend 1 trillion euros over the next 18 monthsto help stimulate the European economy as part of its quantitative easing program.
Meanwhile, manufacturing activity in China bounced back from two straight months of decline, butits economy continues to decelerate. After growing 7.3 percent year-over-year in the fourth quarter,China has reduced its target real GDP growth rate for 2015 to 7 percent. Along those lines, anumber of recent indicators have reflected slower paces of growth. This included industrialproduction, fixed asset investments and retail sales. Investments from manufacturers have fallenfrom 13.5 percent year-over-year in December to 10.6 percent in January/February. It is worthnoting that each of these growth rates is strong relative to other nations, but the challenge is thatgrowth remains much less than what we have become accustomed to for China.
Action on trade legislation, particularly Trade Promotion Authority (TPA), is now expected in theApril-May timeframe, as efforts to negotiate a bipartisan, bicameral TPA bill continue. Newlegislation reauthorizing the Export-Import (Ex-Im) Bank has been introduced in the House, while
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work on crafting a bipartisan Senate bill continues. Other manufacturing legislative priorities arealso stacking up. Trans-Pacific Partnership (TPP) talks are ongoing in Hawaii this week, and the nextround of the U.S.-EU talks move forward in mid-April. Efforts to negotiate sectoral tariff-cutting talksand broader multilateral talks are ongoing at the World Trade Organization (WTO). Product-specificexport control reform also continues.
Chad Moutray is the chief economist, National Association of Manufacturers.
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