The global economy continues to show signs of strength, even as much of the recent data reflect some slowing in many markets, helping to boost international demand. In updated figures on TradeStats Express, U.S.-manufactured goods exports have risen 6.81% year-to-date through the first quarter of 2018 relative to the same time frame in 2017. This extended the 4.65% gain last year as a whole, and more importantly, so far this year, exports have risen in nine of the top 10 markets for U.S.-manufactured goods, with a decline to Hong Kong being the lone exception. In addition, the U.S. trade deficit fell back to earth in March after soaring to the highest level since October 2008 in the prior release. The trade deficit registered $48.96 billion in March, a six-month low. More importantly, goods exports rose to a new all-time high ($140.88 billion).
The J.P. Morgan Global Manufacturing PMI rose from 53.3 in March to 53.5 in April. The headline data have trended slightly lower since reaching nearly a seven-year high in December (54.5), but the data remains encouraging overall, reflecting progress over the past few years. In the latest survey, new orders and output accelerated a bit from the prior month, with the pace of hiring unchanged. In contrast, exports slowed a little. In addition, manufacturing leaders remain very upbeat in their global outlook for the next six months despite that index pulling back in April from March’s level, which was the best since February 2015. In April, all but one of the top 20 markets for U.S.-manufactured goods expanded, illustrating the strength of the international economy once again. The exception was South Korea, which declined at the fastest rate in 13 months. South Korean manufacturing activity has been weak for much of the past year, particularly as the economy has grappled with political uncertainties.
While this is a global report, it is perhaps worth mentioning how well the United States is doing. (In the global numbers described in the above paragraph, the United States accounts for 22.2% of the total weighting.) The IHS Markit U.S. Manufacturing PMI rose from 55.6 in March to 56.5 in April, the strongest expansion pace since September 2014. New orders, output, and exports all increased in April, with demand growth at a three-year high. Measures for hiring and future output both decelerated slightly in the latest survey, while remaining encouraging overall. On the downside, raw material prices picked up in April, with input costs expanding at rates not seen since June 2011. Those data points are largely consistent with other measures. The competing survey from the Institute for Supply Management has found some softening in recent months, but its overall findings mirror those found in the IHS Markit analysis.
Talks to modernize the North American Free Trade Agreement (NAFTA) are seeking to conclude in the coming days, with trade ministers meeting in Washington, D.C., all week. The United States and China begin talks to resolve intellectual property (IP) theft and other challenges in U.S.–China commercial relations, as the Office of the U.S. Trade Representative (USTR) prepared to receive comments and hold hearings on proposed tariffs on $50 billion in manufactured goods imports from China. President Donald Trump announced the U.S. withdrawal from the Iran nuclear agreement. President Trump has extended the suspension of steel and aluminum tariffs for several countries with which the United States is seeking to include quota limitations, while the Commerce Department continues to receive thousands of requests for product exclusions from the Section 232 tariffs. Manufacturers continue pushing for passage of the Miscellaneous Tariff Bill (MTB) and are working with Congress and the administration on efforts to reform the role of the Committee on Foreign Investment in the United States (CFIUS), while the administration considers country eligibility under the Generalized System of Preferences (GSP).
Economic report provided by Chad Moutray, Ph.D., CBE, Chief Economist, National Association of Manufacturers.