The state of the economy can often dictate how much growth certain industries are experiencing, which can influence their business decisions and modernization requirements. Consequently, Ultra takes a huge interest in world economic affairs, with special focus on the U.S. Manufacturing and Distribution Industry.
February’s state of the economy update includes facts and figures captured in January, as well as details about events that have major sway over the economy.
Manufacturing in the Month of Love
The IMF expects economic activity to pick up in 2017 and 2018, especially in emerging markets and developing economies. Specifically, global activity could accelerate more strongly if policy stimulus turns out to be larger than currently projected in the United States or China.
Notable negative risks to activity include a possible shift toward inward-looking policy platforms and protectionism, a sharper-than-expected tightening in global financial conditions that could interact with balance sheet weaknesses in areas of the country where the euro is the currency and in some emerging market economies, increased geopolitical tensions, and a more severe slowdown in China.
The strongest manufacturing growth among the U.S.’s top trading partners was in the Netherlands, Germany, the United Kingdom, Taiwan, Canada and France. In fact, Canada, France, and Germany all saw multiyear highs, while manufacturers in the Eurozone reported their best growth rates since April 2011.
Despite a slower PMI in China, the Caixin index showed that it was the fifth consecutive monthly expansion in manufacturing activity in the country, illustrating just how much the market has stabilized recently.
North American Manufacturing
In North America, Canadian manufacturing activity expanded at its fastest rate in 25 months, with stronger data across the board and representing progress after nearly stalling in September. The Markit Mexico Manufacturing PMI rose from 50.2 in December – just barely above neutral territory and its slowest pace since October 2013 – to 50.8 in January.
Finally, as the United States prepares for a transition to the new Trump administration, trade continues to be one of the key issues under discussion with the NAFTA renegotiation, U.S. removal from TPP (Trans-Pacific Partnership), U.S. and U.K. relationship (see Brexit) on the docket in the coming months.
More specific to the U.S., each region experienced different developments last month. Goods exports were mostly higher with the largest increases being in capital goods and industrial supplies and materials. The capital goods category was boosted by a $1.01 billion gain in civilian aircraft exports, as well as a large gain in automotive vehicles.
Five of the twelve federal districts in the U.S. release specific data on manufacturing every month and according to January’s data, all five experienced increased business activity last month. Furthermore, Business Insider released a map based on U.S. Census Bureau data that detailed the highest value exports of each state in the U.S. The Aircraft, fuel oil, and automotive industries dominate the Western and Southern regions of the U.S., while raw materials, chemicals, electronics, and agriculture products saturate the rest of the country.
Although manufacturing appears to be on the upswing in the U.S., exports still struggle in the international market. Exports were lower in five of the top-six markets for U.S.-manufactured goods in 2016, including Canada, Mexico, China, the United Kingdom, and Germany. The lone exception was Japan which managed only a small gain for the year.
Ultra’s Take on the February Economy
Expected policy changes from world powers have kept international markets in a tense state, but world growth seems to be stable. In the U.S., every regional index experienced growth in January and it appears that future outlook is positive even though export figures remain strained. However, it seems the U.S. has a strong hold in the aircraft, oil, and automotive industries and should continue to press their advantage in those areas.
Conversely, manufacturing firms in the U.S. could focus more energy on faster growing industries such as electronics, so as not to be tied down by the old and slow-changing, albeit reliable, traditional industries. In any case, most firms feel positive about the future and are still looking to make improvements.
Philadelphia’s special questions section showed that firms are thinking of increasing employment and work hours and other regions are using their positive sentiment and production to foster their own improvements. It would seem that the year is off to a running start.
To learn more about Ultra’s take on the economy, read our post from last month.