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Continued Progress Globally, but with Risks from Coronavirus

The Monthly Toplines

• Prior to the ongoing novel coronavirus global health outbreak, the Chinese economy was starting to show signs of stabilization. Manufacturing activity expanded for the sixth straight month, despite the Caixin China General Manufacturing PMI slipping from 51.5 in December to 51.1 in January. Real GDP grew 6.0% year-over-year in the fourth quarter, the same pace as in the third quarter. But that remains the slowest pace of growth in China since the first quarter of 1992. First quarter growth is likely to weaken materially. 

• The bulk of the sentiment surveys and economic data described below predate recent worries about the novel coronavirus outbreak. Manufacturers in the United States and elsewhere are experiencing production disruptions and lost sales.

• Nonetheless, the J.P. Morgan Global Manufacturing PMI expanded for the third straight month, rising to a nine-month high. Respondents were also the most upbeat in their assessments for future output since August 2018.

• Eight of the top 10 markets for U.S.-manufactured goods experienced stronger manufacturing activity in January than in December, continuing the stabilization trend seen in recent months.

• Despite continued progress globally over the past few months, the manufacturing sector remains weaker than desired. Indeed, half of the top 10 markets contracted in the latest surveys. Those markets were Germany, Japan, Mexico, the Netherlands and South Korea.

• The four countries among the top 10 markets for U.S.-manufactured goods with expanding growth in January were Brazil, Canada, China and France. The United Kingdom had contracted for seven straight months, but improved to neutral in January as the nation prepared for Brexit on Jan. 31.

• The IHS Markit Eurozone Manufacturing PMI began the new year on an encouraging note, rising from 46.3 in December to 47.9 in January. While activity in the sector has contracted for 12 consecutive months, January’s index reading suggested the slowest rate of decline since April.

• Meanwhile, real GDP rose by 1.0% year-over-year in the Eurozone, the slowest pace since the fourth quarter of 2013. In addition, industrial production fell 2.1% in December, with a steep 4.1% decline year-over-year and negative results for the 14th consecutive month. More encouragingly, the unemployment rate dropped to 7.4% in December, the lowest rate since May 2008.  

• According to new seasonally adjusted data from TradeStats Express, U.S.-manufactured goods declined 2.5% in 2019 after experiencing better data in both 2017 and 2018. Firms have grappled with slowing global growth and trade uncertainties. Still, exports remain just 2.7% from the all-time high seen in 2014.
• After more than three years of work, manufacturers began 2020 by focusing on the following issues:
• Applauding final U.S. government approval of the United States–Mexico–Canada Agreement, with full implementation expected later this year
• Welcoming signing of a “Phase One” U.S.–China deal while urging that intensive talks continue on the many remaining issues as part of a broader bilateral trade agreement
• Working to ensure that the seven-year reauthorization of the U.S. Export-Import Bank is fully utilized by manufacturers across the country
• Manufacturers remain focused on several other important trade priorities:
• Moving forward a positive agenda at the critically important World Trade Organization
• Securing a strong Miscellaneous Tariff Bill in 2020 to eliminate tariffs on products not produced or available in the United States
• Monitoring congressional activity relating to sanctions