Finally, A Global Tailwind for U.S. Manufacturing Growth

Transcription

1 Finally, A Global Tailwind for U.S. Manufacturing Growth MAPI Foundation Webinar December 12, 217 Cliff Waldman Chief Economist cwaldman@mapi.net

2 Key Takeaways The global economic recovery is both strengthening and widening but remains historically moderate. The falling dollar has reached a temporary trough, creating an uncertainty for manufacturing. The MAPI Foundation baseline forecast is for an average of 1.5% U.S. manufacturing growth from Simulations were conducted assuming a modest fiscal boost from tax reform legislation. U.S. political/policy shocks, the change of leadership at the Federal Reserve, and the potential confrontation with North Korea are the principle risks to the U.S. manufacturing outlook. Aerospace, chemicals, machinery, and computers will lead U.S. manufacturing growth over the next few years.

3 Percent Forecast of Modestly Stronger Global Growth 6 World GDP Growth (F) 218 (F) F=Forecast Source(s): International Monetary Fund

4 Percent An Acceleration of Global Goods Export Growth 7 Global Growth of Goods Exports (F) 218 (F) F=Forecast Source(s): International Monetary Fund

5 Percent An Improving Picture for Global Manufacturing Growth Select Economies, Forecast of Manufacturing/Industrial Production Growth World United Kingdom Eurozone Japan China Asia, ex Japan Brazil Mexico Source(s): Consensus Forecasts and MAPI Foundation, November 217

6 214 Q1 214 Q2 214 Q3 214 Q4 215 Q1 215 Q2 215 Q3 215 Q4 216 Q1 216 Q2 216 Q3 216 Q4 217 Q1 217 Q2 217 Q3 Annual Percent Change U.S. Growth Appears to Be Accelerating in Sync with an Improving Global Economy 6 5 U.S. GDP Growth, Inflation-Adjusted, Seasonally Adjusted Source(s): U.S. Commerce Department, Bureau of Economic Analysis

7 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Index: January 1997=1 For Manufacturers, a Frustrating Trough in a Helpful Dollar Decline U.S. Broad Nominal Dollar and Dollar Versus Major Currencies Index March 1973= Broad nominal dollar Dollar vs. major currencies Source(s): Federal Reserve Board

8 211 Q3 211 Q4 212 Q1 212 Q2 212 Q3 212 Q4 213 Q1 213 Q2 213 Q3 213 Q4 214 Q1 214 Q2 214 Q3 214 Q4 215 Q1 215 Q2 215 Q3 215 Q4 216 Q1 216 Q2 216 Q3 216 Q4 217 Q1 217 Q2 217 Q3 Percent As Brexit Looms, Improving Growth in the Eurozone, Slowing Growth in the U.K. 5 Eurozone and UK Real GDP Growth, Year-Over-Year United Kingdom Eurozone Source(s): Eurostat and United Kingdom Central Statistical Office

9 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Percent Change Improvement for Eurozone Manufacturing 8 Eurozone Manufacturing Production, Year-Over-Year Growth Source(s): Eurostat

10 21 Q4 211 Q3 212 Q2 213 Q1 213 Q4 214 Q3 215 Q2 216 Q1 216 Q4 217 Q3 Percent Japan Finds Consistent Growth 4 Japan, Real GDP Growth, Year-Over-Year Source(s): Economic and Social Research Institute

11 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Percent Japanese Manufacturing Growth on the Upswing 1 Japan, Manufacturing Output Growth, Year-Over-Year Percent Change Source(s): Bank of Japan

12 Percent China s Slowdown: It s Over! China s Annual GDP Growth Source(s): National Bureau of Statistics of China

13 Dec-7 Jun-8 Dec-8 Jun-9 Dec-9 Jun-1 Dec-1 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Percent (Year/Year) Positive Growth in China Trade Resumes China s Total Export and Total Import Growth Exports Imports Source(s): China Statistical Information and Consultancy Service Center

14 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Year to Date Percent Change (Year/Year) A Mixed Picture on Capital Spending in China China s Fixed Asset Investment, Purchase of Equipment and Tools Source(s): National Bureau of Statistics of China

15 Oct-9 Apr-1 Oct-1 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Percent (Year/Year) A Steady Picture for Chinese Manufacturing Growth 3 China s Growth of Industrial Value-Added Source(s): National Bureau of Statistics of China

16 212 Q4 213 Q3 214 Q2 215 Q1 215 Q4 216 Q3 217 Q2 Percent (Year/Year) Emerging Markets: Brazil s Tailspin Appears to Have Ended 1 Brazil s Real GDP Growth Source(s): IHS Global Insight

17 212 Q4 213 Q3 214 Q2 215 Q1 215 Q4 216 Q3 217 Q2 Percent The Russian Recession Comes to an End 4 Russia s Real GDP Growth, Year-Over-Year Source(s): IHS Global Insight

18 212 Q4 213 Q3 214 Q2 215 Q1 215 Q4 216 Q3 217 Q2 Percent Indian Economy Shows Tentative Signs of Emerging from Its Slowdown India, Real GDP Growth, Year-Over-Year Source(s): IHS Global Insight

19 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Percent (Year/Year) Significant Export Improvement in Mexico, A Good Sign for North America 2 Mexico, Growth of Total Export Demand Source(s): National Institute of Statistics and IHS Global Insight

20 212 Q4 213 Q3 214 Q2 215 Q1 215 Q4 216 Q3 217 Q2 Percent The Domestic Mexican Economy is Slowing Mexico, Real GDP Growth, Year-Over-Year Source(s): IHS Global Insight

21 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Percent Stronger Manufacturing Growth Could Lead to Stronger Economic Growth in Mexico 1 Mexico Manufacturing Production Growth, Year-Over-Year Source(s): National Institute of Statistics and IHS Global Insight

22 212 Q1 212 Q4 213 Q3 214 Q2 215 Q1 215 Q4 216 Q3 217 Q2 Percent After a Commodities-Led Surge, Canadian Economic Growth Slows 8 Canada Real GDP Growth, Seasonally Adjusted at Annual Rate Source(s): Statistics Canada

23 214 Q1 214 Q2 214 Q3 214 Q4 215 Q1 215 Q2 215 Q3 215 Q4 216 Q1 216 Q2 216 Q3 216 Q4 217 Q1 217 Q2 217 Q3 Percent Apart From Hurricanes, Clear Signals of Stronger U.S. Manufacturing Growth U.S. Manufacturing Production Growth, Annual Percent Change, Seasonally Adjusted Source(s): Federal Reserve Board

24 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Percent The Purchasing Managers Index Transmits Optimistic Signals Purchasing Managers Index for U.S. Manufacturing Source(s): Institute for Supply Management

25 215 Q1 215 Q2 215 Q3 215 Q4 216 Q1 216 Q2 216 Q3 216 Q4 217 Q1 217 Q2 217 Q3 Percent Mixed Picture on Manufacturing Demand Drivers U.S. Total Export Growth, Annual Rate, Seasonally Adjusted Source(s): U.S. Bureau of Economic Analysis

26 215 Q1 215 Q2 215 Q3 215 Q4 216 Q1 216 Q2 216 Q3 216 Q4 217 Q1 217 Q2 217 Q3 Percent U.S. Equipment Investment Growth Strengthening as Global Risks Abate U.S. Equipment Expenditure Growth, Annual Rate, Seasonally Adjusted Source(s): U.S. Bureau of Economic Analysis

27 (F) 218 (F) 219 (F) 22 (F) 221(F) Annual Percent Change The Era of Moderate U.S. Economic Growth Will Continue 3 November 217 Forecast: Annual GDP Growth 2 1 F=Forecast Source(s): MAPI Foundation, November 217

28 (F) 218 (F) 219 (F) 22 (F) 221(F) Annual Percent Change Moderate Growth in Consumer Spending and Capital Spending Annual Growth of U.S. Consumer Spending and U.S. Equipment Investment Growth Consumer Spending Capital Spending F=Forecast Source(s): MAPI Foundation, November 217

29 (F) 218 (F) 219 (F) 22 (F) 221(F) Annual Percent Change Modest Growth in Exports Even as Trade Pressures Continue Annual Growth of U.S. Total Exports and U.S. Total Imports Exports Imports F=Forecast Source(s): MAPI Foundation, November 217

30 (F) 218 (F) 219 (F) 22 (F) 221 (F) Annual Percent Change Modest Acceleration in U.S. Manufacturing Growth U.utSt Slow Forecast of U.S. Manufacturing Growth F=Forecast Source(s): Federal Reserve Board and MAPI Foundation, November 217

31 Percent Plausible Range for U.S. Manufacturing Growth Is from 1.2% to 1.8% Annual Forecast, Alternative Global Growth Scenarios, Average Growth Rate for Baseline Pessimistic Optimistic Non-U.S. Advanced Country GDP Developing Country GDP U.S. Manufacturing Growth Source(s): MAPI Foundation

32 Machinery Food Nonmetallic Mineral Products Wood Products Petroleum & Coal Products Computers & Electronic Products Fabricated Metal Products Primary Metals Manufacturing - SIC Basis Elec. Eq., Appliances, & Components Rubber & Plastics Products Chemicals Furniture & Related Products Printing Support Activities Textile Product Mills Paper & Products Motor Vehicles & Parts Textile Mills Miscellaneous Aerospace Products & Parts Apparel Annual Percent Change Machinery Subsector Growth Dominates in MAPI Forecast of Output Growth in Manufacturing Subsectors, Source(s): MAPI Foundation, November 217

33 Aerospace Products & Parts Rubber & Plastics Products Chemicals Motor Vehicles & Parts Computers & Electronic Products Food Manufacturing - SIC Basis Elec. Eq., Appliances, & Components Miscellaneous Machinery Nonmetallic Mineral Products Fabricated Metal Products Paper & Products Furniture & Related Products Primary Metals Wood Products Petroleum & Coal Products Printing Support Activities Textile Mills Textile Product Mills Apparel Annual Percent Change Aerospace Expected to Dominate U.S. Manufacturing Growth by MAPI Forecast of Output Growth in Manufacturing Subsectors, Source(s): MAPI Foundation, November 217

34 Conclusions The global economic recovery is both strengthening and widening but remains historically moderate. The falling dollar has reached a temporary trough, creating an uncertainty for manufacturing. The MAPI Foundation baseline forecast is for an average of 1.5% U.S. manufacturing growth from Simulations were conducted assuming a modest fiscal boost from tax reform legislation. U.S. political/policy shocks, the change of leadership at the Federal Reserve, and the confrontation with North Korea are the principle risks to the U.S. manufacturing outlook. Aerospace, chemicals, machinery, and computers will lead U.S. manufacturing growth over the next few years.

35 Questions?